McDonald’s Corporation (MCD)

Conclusion

McDonald's owns, operates and franchises restaurants in the United States and abroad, selling hamburgers, chicken sandwiches, fries, breakfast and beverages. On 9 November 2026 the share price was 281.44 USD, giving a market capitalisation of 198.6 billion USD.

The verdict is fair. The fair value band runs from 212.81 to 319.21 USD with a midpoint of 266.01 USD, and the margin of safety is -5.5% at the current price. Today's multiples sit below their own ten-year medians: price to earnings is 22.1 against a median of 26.1, and enterprise value to EBITDA is 17.1 against 19.2. The discounted cash flow gives 202.76 USD per share at a discount rate of 8.87%. The reverse DCF implies revenue growth of 9.4% a year, against 7.0% delivered over five years and free cash flow per share growth of 10.2% over the same period. The price therefore asks for more growth than the company has recently produced.

The case rests on the return on capital and the cash generation. Return on invested capital is 19.1% against a weighted average cost of capital of 7.8%, a gap of 11.4% as given. The operating margin is 46.4%, and the Altman Z-score is 4.82. The weakest numbers are net debt to EBITDA at 3.62, a next-year earnings estimate that has been cut by 2.0% over the last 90 days, and a ten-year revenue compound growth of only 0.6%. If the estimate cuts continue, the fair value band would come under pressure.

Financial health

Financial strength is green: the Altman Z-score of 4.82 and the current ratio of 1.23 are assessed as good, while net debt to EBITDA of 3.62 and interest coverage of 7.9 are neutral. The quick ratio is 0.96 and the debt to equity ratio is not available. The Altman Z-score of 4.82 sits in the safe zone, though that model was designed for manufacturers and this company is a restaurant operator. Insolvency risk: low, about 0.9% by the estimate of the Ohlson model over one to two years, based on figures as of 31 December 2025. The net debt to EBITDA of 3.6 times and the interest coverage of 7.9 times are the figures to watch, because the company carries a substantial debt load relative to its earnings.

Earnings quality

Earnings quality is green, supported by a free cash flow conversion of 83.3% on a trailing basis and 86.5% over five years, and by a Beneish M-score of -2.6 that points to an unlikely risk of manipulation. The accrual ratio is -3.5%, and stock-based compensation is 0.66% of revenue. Free cash flow after stock compensation is 7.3 billion USD on a trailing basis. The share count fell at a compound rate of 0.9% over five years, which indicates buybacks. The Piotroski score is 6 out of 9. The company beat earnings estimates in 5 of the last 8 quarters, with an average surprise of 1.2%. Estimate revisions are negative: 11 current-year estimates were cut and 4 raised in the last 30 days, and next year's estimates have fallen 2.0% over 90 days with 22 cuts and no raises.

Profitability

Profitability is green. The gross margin is 57.2% against a ten-year median of 53.5%, the operating margin is 46.4% against 42.5%, and the net margin is 32.4% against 28.4%. The operating margin has a stability measure of 10.1%. Return on invested capital is 19.1% against a weighted average cost of capital of 7.8%, a gap of 11.4% as given, and the five-year median return on invested capital is 19.8%. The return on equity is not available as a value because equity is negative, so it cannot be read as a measure of quality. The DuPont split for 2025 shows a net margin of 31.9% and an asset turnover of 0.45, so the return comes from margins rather than from asset use. Leverage is not inflating a high return on equity here.

Growth

Growth is yellow. Revenue compounded at 5.1% over three years, 7.0% over five years and 0.6% over ten years. Earnings per share grew at 12.8% over three years, 13.6% over five years and 9.6% over ten years, while free cash flow per share grew at 10.7%, 10.2% and 7.2% over the same periods. Revenue rose in 5 of the 10 comparable years. The expected growth in earnings for next year is 6.0%, which the market has treated as neutral. Earnings growth has run well ahead of revenue growth, which means the recent gains rest on margins and buybacks more than on a rapid expansion of sales.

Valuation

Valuation is yellow. The price to earnings multiple is 22.1 against a ten-year median of 26.1, a premium of -15.5%. Enterprise value to EBITDA is 17.1 against 19.2, a premium of -10.9%. Price to free cash flow is 26.5 against 33.4, a premium of -20.6%, and price to sales is 7.1 against 8.1, a premium of -11.7%. The discounted cash flow gives 202.76 USD per share at a discount rate of 8.87%, with about 57% of its value coming from the terminal value. The fair value from historical multiples is 329.26 USD. The fair value band runs from 212.81 to 319.21 USD, with a midpoint of 266.01 USD and a margin of safety of -5.5% at 281.44 USD. These figures are an order of magnitude built on fixed assumptions, not a price target. The dividend yield is 2.7%, with a forward yield of 2.8%, and the payout is 70.4% of free cash flow.

Risks

The main risk is the debt load. A net debt to EBITDA of 3.6 times leaves less room for error if earnings fall, and the interest coverage of 7.9 times would shrink quickly under higher borrowing costs. Continued cuts to next year's estimates, which have fallen 2.0% over 90 days, would weaken the earnings base behind the fair value band. A ten-year revenue growth rate of 0.6% shows that long-run sales growth has been slow, so the reverse DCF's implied growth of 9.4% depends on a return to faster expansion. The debt to equity ratio, the return on equity and the debt maturity schedule are not available. The analysis also lacks revenue by segment, so it cannot show which regions or formats drive the results. The fair value rests on fixed assumptions and is not a forecast.