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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. 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).
- The debt-to-equity ratio is somewhat low, currently at 0.96, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- 45.10% 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 20.34% compares favorably to the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.6%. 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.
- 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.
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. The company operates approximately 34,000 restaurants in 120 countries around the world. McDonald's has a market cap of $90.27 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 16.9, below the S&P 500 P/E ratio of 17.7. Shares are down 9.8% 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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