Grab a Value Meal, by James AltucherSince I wrote about McDonald's in "
- McDonald's has decided to sell 1,500 company-owned restaurants within the next three years. While this isn't the 8,000 activist investor William Ackman wanted the company to sell, it is certainly a start. I believe once management and investors realize the clear benefits of a shifted business model, the company will proceed to sell more company-owned restaurants.
- The company said it would buy back $1 billion in stock. While this isn't the $13 billion Ackman demanded, it will certainly help to increase shareholder value. Because the company is buying back roughly 30 million shares, the stock price should appreciate simply due to expansion in EPS/cash flows/EBIT/EBITDA per share. Many Wall Street analysts justify valuations by saying a stock should trade at Y times earnings per share. With fewer shares, the EPS figure inflates.
- Chipotle (CMG) has come public at a solid valuation, showing investors that McDonald's can actually deliver value. Spinning Chipotle off allowed investors to receive the premium valuation this growth business deserves. Chipotle currently trades for 35 times earnings and 22 times EV/EBITDA vs. nine times EV/EBITDA and 22 times earnings for the parent company.