By James BrumleyNEW YORK ( StreetAuthority) -- What a difference five months can make. Back in January, McDonald's ( MCD) was trading at $102, thanks to 2011's strong 34% rally, and more and more investors were excited to step into what looked like a well-established ride up.
PerspectiveThough they may not know it, investors can collectively be quite intuitive. The gradual pullback that began in mid-January was due to no apparent reason at the time. Then things started to make sense. A couple of weeks ago, McDonald's cautioned that the second quarter's per-share earnings figure was going to be about 5%, or 7 to 9 cents, lower than first anticipated. Shortly after that, Goldman Sachs downgraded the company from buy to neutral. But regardless of weaker short-term quarterly results, McDonald's is still a great stock to own. Envisioning long-term performance is crucial for a stock like this. In 2011, for instance, per-share earnings improved by 14% from 2010's $4.61. And as previously noted, McDonald's shares rallied 34% in 2011, sending them up to a price-to-earnings ratio of 19.6 by the end of December. That's a valuation that hadn't been seen since 2007, and investors likely knew they were pushing their luck then, too. So where's the stock valued now? At a trailing P/E of 16.8, which has been McDonald's average P/E figure for the past three years. Translation: This is a fair price for the stock.