McDonald’s Stock ( NYSE:MCD )
One of our favorite stocks to consider in this market scenario is the titan of fast food and dividend growth, McDonald’s ( NYSE:MCD ), for several reasons.
McDonald’s benefits from additional revenue from its franchisees and is largely protected from labor and food cost inflation because of its mostly franchised business model.
The company offers exceptional value to customers, not just with its 6- and 2-piece chicken nugget selections but also with its 2 $2 breakfast choices.
McDonald’s has a proven track record of excellent growth and is a dividend-growth company. The company might be among the finest investments given the recent performance of dividend payers over the past 12 to 18 months.
We believe that McDonald’s stock will eventually command a valuation of at least $300 per share, which is at the upper end of our fair value estimate range. As we shall discuss in this note, the company is well-positioned and operating efficiently, albeit we caution investors to be aware of its high net debt level and the fact that free cash flow was under pressure in 2022 following a very successful 2021.
At the top of our fair value estimate range, we value shares of McDonald’s at $306.
Away from Increasing Inflationary Pressures
Perhaps there are gaps in our understanding of McDonald’s business model.
By the end of 2022, the corporation will have more than 40,000 McDonald’s locations, although 95% of them will be franchised. Due to the fact that these fees are based on the sales at the franchisees’ own restaurants, they are quite lucrative and produce steady, dependable inco...
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