McDonald's Corporation Stock Buy Recommendation Reiterated (MCD)

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 ( TheStreet) -- McDonald's Corporation (NYSE: MCD) 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, increase in net income, growth in earnings per share and expanding profit margins. 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:
  • MCD's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth 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 increased by 1.4% when compared to the same quarter one year prior, going from $1,376.60 million to $1,396.10 million.
  • MCDONALD'S CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MCDONALD'S CORP increased its bottom line by earning $5.36 versus $5.28 in the prior year. This year, the market expects an improvement in earnings ($5.80 versus $5.36).
  • 39.20% 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 20.08% compares favorably to the industry average.
  • MCD has underperformed the S&P 500 Index, declining 6.02% from its price level of one year ago. 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. The company operates approximately 34,000 restaurants in 120 countries around the world. McDonald's has a market cap of $94.51 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 17.6, below the S&P 500 P/E ratio of 17.7. Shares are up 6.7% year to date as of the close of trading on Friday.

You can view the full McDonald's Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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