Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of A . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MCDONALD'S CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 44.60% is the gross profit margin for MCDONALD'S CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.50% is above that of the industry average.
- MCDONALD'S CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MCDONALD'S CORP increased its bottom line by earning $5.28 versus $4.58 in the prior year. This year, the market expects an improvement in earnings ($5.40 versus $5.28).
McDonald's Corporation, together with its subsidiaries, franchises and operates McDonald's restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. The company has a P/E ratio of 17.2, equal to the average leisure industry P/E ratio and below the S&P 500 P/E ratio of 17.7. McDonald's has a market cap of $92.47 billion and is part of the
industry. Shares are down 8.2% year to date as of the close of trading on Monday.
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--Written by a member of TheStreet Ratings Staff.
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