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Trade-Ideas: McDonald's Corporation (MCD) Is Today's "Storm The Castle" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified McDonald's Corporation ( MCD) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified McDonald's Corporation as such a stock due to the following factors:

  • MCD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $553.4 million.
  • MCD has traded 356,394 shares today.
  • MCD is trading at 1.64 times the normal volume for the stock at this time of day.
  • MCD crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on MCD:

McDonald's Corporation franchises and operates McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. Its restaurants offer various food items, soft drinks, coffee, and other beverages, as well as breakfast menus. The stock currently has a dividend yield of 3.2%. MCD has a PE ratio of 17.5. Currently there are 11 analysts that rate McDonald's Corporation a buy, no analysts rate it a sell, and 14 rate it a hold.

The average volume for McDonald's Corporation has been 4.7 million shares per day over the past 30 days. McDonald's has a market cap of $95.3 billion and is part of the services sector and leisure industry. The stock has a beta of 0.20 and a short float of 0.9% with 1.60 days to cover. Shares are up 7.5% year to date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates McDonald's Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in stock price during the past year, good cash flow from operations and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MCDONALD'S CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MCDONALD'S CORP increased its bottom line by earning $5.36 versus $5.28 in the prior year. This year, the market expects an improvement in earnings ($5.60 versus $5.36).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has slightly increased to $1,509.80 million or 1.80% when compared to the same quarter last year. Despite an increase in cash flow, MCDONALD'S CORP's average is still marginally south of the industry average growth rate of 6.71%.
  • 44.55% is the gross profit margin for MCDONALD'S CORP which we consider to be strong. Regardless of MCD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCD's net profit margin of 19.71% compares favorably to the industry average.

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