Trade-Ideas: McDonald's Corporation (MCD) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified McDonald's Corporation ( MCD) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified McDonald's Corporation as such a stock due to the following factors:

  • MCD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $429.4 million.
  • MCD has traded 2.8 million shares today.
  • MCD traded in a range 209.5% of the normal price range with a price range of $1.90.
  • MCD traded above its daily resistance level (quality: 103 days, meaning that the stock is crossing a resistance level set by the last 103 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on MCD:

McDonald's Corporation franchises and operates McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company's restaurants offer various food items, soft drinks, coffee, and other beverages, as well as breakfast menus. The stock currently has a dividend yield of 3.4%. MCD has a PE ratio of 17.2. Currently there are 11 analysts that rate McDonald's Corporation a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for McDonald's Corporation has been 4.9 million shares per day over the past 30 days. McDonald's has a market cap of $94.6 billion and is part of the services sector and leisure industry. The stock has a beta of 0.33 and a short float of 1.3% with 2.88 days to cover. Shares are down 1.6% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates McDonald's Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, growth in earnings per share, increase in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • MCD's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $1,873.50 million or 1.26% when compared to the same quarter last year. In addition, MCDONALD'S CORP has also vastly surpassed the industry average cash flow growth rate of -51.97%.
  • 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 $5.56 versus $5.36 in the prior year. This year, the market expects an improvement in earnings ($5.85 versus $5.56).
  • The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 0.1% when compared to the same quarter one year prior, going from $1,396.10 million to $1,397.00 million.
  • 44.43% 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 19.69% compares favorably to the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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