Shares of McDonald’s (MCD) aren’t going anywhere. Profit growth has been 6% or les the last four quarters and that trend is expected to continue for at least the next six months. At 16 times next year’s earnings, this $96 stock should be $96 next year.
One Year Chart
This quarterly profit growth (bottom) is not great by any means, for me anyway. I’m surprised the stock went from $85 to $104, but during that time conservative dividend paying stocks were in demand. Then investors came to their senses and realized this stock wasn’t worth $100.
MCD’s estimated long term growht rate is 8% per year. If you tack on a 3% dividend, that’s an 11% annual return. Since is is McDonald’s the P/E should be higher than the growth rate, and I think the stock will sell for 16 times earnings next year. It’s selling for that now.
Fair Value
I think MCD will be $96 next year. It’s that exact price now. This stock looks like dead money until the 2014 Q4 when I think the market will take it higher on 2015 expectations.
Sharek’s Take
McDonald’s is a great conservative stock for retired people who need a high degree of safety and around a 10% total return — 3% of which is dividends they can spend. But for growth stock investors, this isn’t on sale and doesn’t give much opportunity to make money. I think MCD stock will be this price a year from now, it looks like dead money.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
