Dear Reader,
McDonald's Corporation, the fast food restaurants chain, is currently valued at 173.4 billion USD by public markets.
I estimate the real intrinsic value of McDonald's is around 125 billion USD. Yes, McDonald's has high net profit margin of approximately 25 % for the last five rolling quarters, but at Price/Earnings ratio of 33.73 McDonald's is way overvalued. Yes, the company has a stable, proven in decades business model, high dividend yield, durable competitive advantage or moat as Warren Buffett would say, but the company simply seems overvalued to me. McDonald's valuation seems to be pricing growth that currently proves illusive. Yes, after the pandemic ends people may well eat out more and be more frugal, but McDonald's stock has priced such growth for the last five years and it has not come to fruition.
Apparently, investors are rewarding McDonald's for its high profitability.
All in all, I think McDonald's is worth around 125 billion USD or 28 % discount from its current price.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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