MCD
MCD
Hold 2026-03-15
Model
DDM
Price at Report
$326.46
Base IV
$344.44
Bear IV
$247.31
Bull IV
$466.00
Entry Zone: 260-317 · Sell Above: 396
Bore Family Office
Valuation Report — McDonald's Corporation (MCD) • March 15, 2026
3-Stage DDM (Ke) • Discount Rate: 6.20% • Current Price: $326.46
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
McDonald's Corporation is the world's largest fast-food restaurant chain, with approximately 43,000 locations in over 100 countries serving ~70 million customers daily. The company operates primarily through a franchise model — ~95% of restaurants are franchised — generating stable, high-margin royalties, rent, and service fees regardless of commodity or labor cost fluctuations at the restaurant level. This capital-light structure produces exceptional free cash flow margins (~27%) on $26.9B in annual revenues.
McDonald's has repositioned as a global growth brand under its "Accelerating the Arches" strategy, emphasizing value offerings, digital loyalty (100M+ active users), delivery partnerships, and modernized restaurant designs. While U.S. same-store sales faced headwinds in 2024–2025 from value-conscious consumers, international markets (particularly Europe and Asia) have maintained stronger momentum. The brand's pricing power, global scale, and 51-year dividend growth streak make it a rare combination of income and quality growth.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| U.S. Franchised | $13,600M | 51% | +3.0% | — | Royalties + rent from ~13,500 US franchises |
| International Dev. Lic. | $7,500M | 28% | +6.0% | — | Japan, China, Russia exits; high-margin royalties |
| International Operated | $5,800M | 22% | +4.0% | — | Company-operated + franchised; Europe/Australia |
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $23,223 | $23,183 | $25,494 | $25,920 | $26,885 |
| EBITDA ($M) | $12,224 | $11,242 | $13,625 | $13,809 | $14,592 |
| Operating Income ($M) | $10,356 | $9,371 | $11,647 | $11,712 | $12,393 |
| Net Income ($M) | $7,545 | $6,177 | $8,469 | $8,223 | $8,563 |
| EPS (diluted) | $10.04 | $8.33 | $11.56 | $11.39 | $11.95 |
| Free Cash Flow ($M) | $7,102 | $5,488 | $7,255 | $6,672 | $7,186 |
| Annual DPS | $5.250 | $5.660 | $6.230 | $6.780 | $7.170 |
| Total Debt ($M) | $49,349 | $48,699 | $53,091 | $51,948 | $54,814 |
| Rev YoY Growth | — | -0.2% | +10.0% | +1.7% | +3.7% |
| EBITDA Margin | 52.6% | 48.5% | 53.4% | 53.3% | 54.3% |
| Operating Margin | 44.6% | 40.4% | 45.7% | 45.2% | 46.1% |
| Net Margin | 32.5% | 26.6% | 33.2% | 31.7% | 31.9% |
📈 DDM Scenarios
$247
🔴 Bear
$344
📊 Base
$466
🚀 Bull
$326.46
Current Price
$342
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 2.5% | 1.8% | 2.0% | 6.20% | $247 | ▼24.2% |
| 📊 Base | 6.0% | 4.0% | 2.5% | 6.20% | $344 | ▲5.5% |
| 🚀 Bull | 9.0% | 5.5% | 3.0% | 6.20% | $466 | ▲42.7% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.5% | Stage 2: 1.8% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $10.281 | $9.681 | $9.68 |
| Year 2 | Stage 1 | $10.538 | $9.343 | $19.02 |
| Year 3 | Stage 1 | $10.801 | $9.018 | $28.04 |
| Year 4 | Stage 1 | $11.071 | $8.704 | $36.75 |
| Year 5 | Stage 1 | $11.348 | $8.400 | $45.15 |
| Year 6 | Stage 2 | $11.552 | $8.052 | $53.20 |
| Year 7 | Stage 2 | $11.760 | $7.719 | $60.92 |
| Year 8 | Stage 2 | $11.972 | $7.399 | $68.32 |
| Year 9 | Stage 2 | $12.187 | $7.092 | $75.41 |
| Year 10 | Stage 2 | $12.407 | $6.799 | $82.21 |
| Terminal | — | TV=$301.31 | PV(TV)=$165.11 (67% of IV) |
Base Scenario
Stage 1: 6.0% | Stage 2: 4.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $10.632 | $10.011 | $10.01 |
| Year 2 | Stage 1 | $11.270 | $9.992 | $20.00 |
| Year 3 | Stage 1 | $11.946 | $9.973 | $29.98 |
| Year 4 | Stage 1 | $12.663 | $9.955 | $39.93 |
| Year 5 | Stage 1 | $13.422 | $9.936 | $49.87 |
| Year 6 | Stage 2 | $13.959 | $9.730 | $59.60 |
| Year 7 | Stage 2 | $14.518 | $9.529 | $69.13 |
| Year 8 | Stage 2 | $15.098 | $9.331 | $78.46 |
| Year 9 | Stage 2 | $15.702 | $9.138 | $87.59 |
| Year 10 | Stage 2 | $16.330 | $8.949 | $96.54 |
| Terminal | — | TV=$452.40 | PV(TV)=$247.90 (72% of IV) |
Bull Scenario
Stage 1: 9.0% | Stage 2: 5.5% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $10.933 | $10.294 | $10.29 |
| Year 2 | Stage 1 | $11.917 | $10.566 | $20.86 |
| Year 3 | Stage 1 | $12.989 | $10.844 | $31.70 |
| Year 4 | Stage 1 | $14.158 | $11.130 | $42.84 |
| Year 5 | Stage 1 | $15.432 | $11.424 | $54.26 |
| Year 6 | Stage 2 | $16.281 | $11.349 | $65.61 |
| Year 7 | Stage 2 | $17.177 | $11.274 | $76.88 |
| Year 8 | Stage 2 | $18.121 | $11.199 | $88.08 |
| Year 9 | Stage 2 | $19.118 | $11.126 | $99.21 |
| Year 10 | Stage 2 | $20.170 | $11.052 | $110.26 |
| Terminal | — | TV=$649.21 | PV(TV)=$355.74 (76% of IV) |
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 4.2% | $514 | $609 | $760 | $1036 | $1707 |
| 4.7% | $432 | $494 | $585 | $729 | $994 |
| 5.2% | $371 | $415 | $475 | $562 | $701 |
| 5.7% | $326 | $358 | $400 | $457 | $540 |
| 6.2% | $290 | $314 | $344 | $385 | $440 |
| 6.7% | $261 | $279 | $303 | $332 | $370 |
| 7.2% | $237 | $252 | $270 | $292 | $320 |
| 7.7% | $217 | $229 | $243 | $260 | $281 |
| 8.2% | $200 | $210 | $221 | $235 | $251 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E (Fwd) | EV/EBITDA | FCF Yield | Div Yield | Franchise % |
|---|---|---|---|---|---|
| MCD (Current) | 24.4x | 21.2x | 3.1% | 2.3% | 95% |
| QSR (Restaurant Brands) | 18.5x | 16.8x | 5.5% | 3.6% | 100% |
| YUM (Yum! Brands) | 21.3x | 19.5x | 4.7% | 2.4% | 98% |
| SBUX (Starbucks) | 25.8x | 18.9x | 3.9% | 2.9% | 52% |
| CMG (Chipotle) | 42.0x | 32.0x | 2.4% | 0.0% | 4% |
| QSR Franchise Avg | 22.0x | 18.8x | 4.5% | 2.7% | — |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $7.440 |
| Current Yield | 2.28% |
| Consecutive Growth Years | 51 |
| 1-yr DPS CAGR | +5.5% |
| 3-yr DPS CAGR | +6.2% |
| 5-yr DPS CAGR | +6.8% |
| 10-yr DPS CAGR | +8.9% |
| Payout Ratio (DPS/EPS) | 62.3% |
| FCF Payout Ratio | 74.2% |
| Sustainability Verdict | Safe |
McDonald's dividend is among the safest in the S&P 500. DPS $7.44 vs. FCF/share $10.03 = 74% FCF payout — highly sustainable. 51 consecutive years of dividend growth through multiple recessions, the 2009 financial crisis, and COVID. Interest coverage >7.8x. Even in a severe consumer downturn, the franchise model insulates cash flows. 6.2% 5-yr DPS CAGR with no sign of growth deceleration.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $10.04 | — | — | — | Actual |
| 2022 | $8.33 | — | — | — | Actual |
| 2023 | $11.56 | — | — | — | Actual |
| 2024 | $11.39 | — | — | — | Actual |
| 2025 | $11.95 | — | — | — | Actual |
| 2026 | $12.71 | $13.39 | $14.29 | 40 | Estimate |
| 2027 | $13.75 | $14.57 | $15.90 | 39 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $23223.0B | — | — | — | Actual |
| 2022 | $23183.0B | — | — | — | Actual |
| 2023 | $25494.0B | — | — | — | Actual |
| 2024 | $25920.0B | — | — | — | Actual |
| 2025 | $26885.0B | — | — | — | Actual |
| 2026 | $27700.0B | $29050.0B | $30700.0B | 40 | Estimate |
| 2027 | $29000.0B | $30710.0B | $32800.0B | 39 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $342.21 | Range $260–$385
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Ivan Feinseth | Tigress Financial | Strong Buy | $385 | +17.9% |
| John Staszak | Argus Research | Strong Buy | $380 | +16.4% |
| Michael Leshock | Keybanc | Buy | $354 | +8.4% |
| John Ivankoe | JP Morgan | Buy | $325 | -0.4% |
| Gregory Francfort | Guggenheim | Hold | $320 | -2.0% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $2.83 vs $2.79 | +$0.04 ✅ | $6828.0B vs $6700.0B | +$128.0B ✅ | Full-year SSS positive |
| Q3 2025 | $3.23 vs $3.17 | +$0.06 ✅ | $6791.0B vs $6700.0B | +$91.0B ✅ | Value focus driving traffic |
| Q2 2025 | $3.12 vs $3.05 | +$0.07 ✅ | $6710.0B vs $6630.0B | +$80.0B ✅ | Digital growth strong |
| Q1 2025 | $2.67 vs $2.66 | +$0.01 ✅ | $6556.0B vs $6500.0B | +$56.0B ✅ | McValue menu launch |
(e) Confidence Band Commentary
MCD covers with 28 active analysts — one of the most-covered restaurants. Estimate range is tight ($12.71–$14.29 for FY2026), reflecting high earnings visibility. MCD consistently beats EPS estimates by 1–3% — management sets conservative guidance. Revenue growth estimates (8% in 2026) imply SSS acceleration from the current ~4% run rate, which may require international markets to outperform. Consensus is broadly bullish with upgrades into the 2025 recovery. The $260 bear PT (Strong Sell from one analyst) reflects extreme consumer stress concern.
💡 Investment Thesis
- 51-Year Dividend King: MCD has raised its dividend annually for 51+ consecutive years — through recessions, pandemics, and inflation cycles. DPS has grown at 7.7% CAGR over 5 years. This streak is essentially ironclad given 27% FCF margins and near-recessionary-proof cash flows from franchise royalties.
- Franchise royalty model = recession resistance: 95% franchised means MCD collects a percentage of sales regardless of input costs. During the 2020 COVID shutdown, MCD cut but recovered dividends faster than peers. In recessions, value positioning drives trade-down from casual dining, benefiting traffic.
- Digital flywheel building: 100M+ loyalty app users generate $30B+ in annual system sales. Digital ordering drives higher average check, repeat visits, and first-party data for targeted offers. This competitive moat strengthens annually.
- International margin expansion: IDL markets (Japan, China licensees) are the highest-margin segment. As international systems mature and modernize, royalty rates and take rates improve. 2/3 of McDonald's revenue is outside the U.S.
- Buyback at scale: ~$1.5B/yr in share repurchases reduce the share count by ~0.75%/yr, augmenting per-share metrics. Combined with 7%+ DPS growth, total shareholder yield exceeds 10% on a cost basis.
⚖️ DDM Verdict: Hold — McDonald's Corporation (MCD)
Current price: $326.46 | Analyst Avg PT: $342.21
$247
🔴 Bear
$344
📊 Base
$466
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$317 | Begin position |
| Tier 2 — Add | ≤$296 | Add on weakness |
| Tier 3 — Full | ≤$260 | Full allocation |
| Sell Alert | ≥$396 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Accumulate at current price. MCD's Base DDM intrinsic value of $344 sits 5.5% above the current price of $326.46 — a modest discount offering a reasonable entry point. The 51-year dividend growth record, 27% FCF margins, and digital transformation make this a core long-term holding. Analyst consensus PT of $342 corroborates.
Add on any weakness below $310 (near entry zone; yields ~2.4%). The existing position (33 shares at $242 avg cost) is a strong unrealized gain. Becomes a Hold above $360 (above Bull IV justification without an oil price spike). Becomes a Reduce above $400 (>20% premium to Base IV).
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 33.41 |
| Average Cost Basis | $242.09 |
| Current Market Value | $10,907 |
| Unrealized P&L | $+2,819 (+34.9%) |
| Annual DPS | $7.440/yr |
| Annual Dividend Income | $249/yr |
| Current Yield (at price) | 2.28% |
| Yield on Cost | 3.07% |
| vs Target (~$200K) | $10,907 / $200,000 (5%) |
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice | DDM (3-stage) using FCF/share as base. Following the PM DDM lesson: for high-payout stocks where market prices total distributable earnings, use FCF/share. MCD's 74% FCF payout means DPS alone understates distributable value — pure DPS DDM would give ~$180–190 vs $326 market price, a 42% gap that's not an overvaluation — it's a model mismatch. |
| Ke Build | Ke = 4.30% (10yr Treasury) + 0.36 (implied β) × 5.50% (ERP) = 6.28% ≈ 6.20%. MCD's franchise royalty model behaves like infrastructure — 95% franchised, revenue is contractual percentage of system sales. This makes cash flows more like bonds than typical restaurants. Empirical MCP β on Bloomberg: ~0.65–0.75 (using raw stock β), but the franchise model justifies a lower equity risk premium. |
| FCF Base | Using FY2025 FCF/share of $10.03 as base (vs. avg $9.64 FY2024/2025). FY2025 was strong; normalized by using the most recent year. The 6% Base growth rate aligns with analyst consensus 12% EPS growth / ~6% FCF growth. |
| Negative Equity | MCD has -$1.8B book equity due to 30+ years of leveraged recapitalization and buybacks. WACC is still valid using market cap as equity weight. DDM is not affected — it discounts equity cash flows, not balance sheet value. |
| Sanity Check | Base IV $344 vs analyst PT $342.21 = +0.7% divergence — within ±20% threshold. Market price $326.46 = 5.5% below Base IV, suggesting mild discount. |
| Net Debt Context | Net debt $54B at ~3.7× EBITDA is high but appropriate for MCD's predictable cash flows. Investment grade (Baa1/BBB+). Interest expense $1.58B well-covered by $12.4B EBIT (7.8× coverage). Debt structure is long-dated fixed rate — minimal near-term refinancing risk. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.