MCD - Better Buy: McDonald's vs. Dunkin'
McDonald's (NYSE: MCD) and Dunkin' Brands (NASDAQ: DNKN) both derive most of their revenue from franchising. Through this model, McDonald's now has over 39,000 restaurants in more than 100 countries. Dunkin' has not grown to quite that size, but it franchises about 11,300 locations in the U.S. and 36 other countries.
Investors might wonder if the path to greater potential returns goes through the golden arches or a coffee and doughnut run. Though financials drive a significant part of this choice, the decision may also hinge on an often-overlooked factor.
Analysts project McDonald's will experience a massive drop in profits this year before making a dramatic recovery in 2021 -- a fairly common forecast for businesses heavily impacted by the COVID-19 pandemic. For the fast-food chain, this is expected to translate into about 4% profit growth over two years. Also, at current prices, McDonald's sells for around 28 times forward earnings.
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Better Buy: McDonald's vs. Dunkin'