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 . Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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Highlights from the ratings report include:
- 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 ($5.31 versus $5.28).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 39.90% 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 20.30% compares favorably to the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $1,507.30 million to $1,455.00 million.
- In its most recent trading session, MCD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
McDonald's Corporation franchises and operates McDonald's restaurants in the global restaurant industry. Its restaurants offer various food items, soft drinks, coffee, and other beverages. McDonald's has a market cap of $87.44 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 16.3, below the S&P 500 P/E ratio of 17.7. Shares are down 13.6% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.
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