MCDONALD’S CORPORATION (MCD)

Presented by Liz Guo & Kristel Yu

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TABLE OF CONTENTS

CATALYSTS

VALUATION METRICS

OPPORTUNITIES & RISKS

COMPANY OVERVIEW

INDUSTRY OVERVIEW

FINANCIAL STATEMENTS

COMPETITOR ANALYSIS

COMPANY INDUSTRY FINANCIALS COMPETITORS

INVESTMENT CATALYSTS VALUATION OPPORTUNITIES & RISKS

INVESTMENT THESIS

05.

06.

07.

08.

01.

02.

03.

04.

Catalysts for MCD for the past 2 years

Discussion of calculated valuation metrics

Discussion of the investment opportunities and risks

Brief description of MCD and its operations

Overview of the restaurant and services industry

Income Statement, Balance Sheet, Statement of Cash Flows

Analysis of MCD in comparison to DPZ, EAT, & YUM

Evaluation of MCD’s stock and investment recommendation

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COMPANY OVERVIEW

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MCDONALDS OVERVIEW

Summary

Menu Items

Core Value

• Cheeseburgers
• Hamburgers
• French fries
• Chicken nuggets
• Salads
• Breakfast items
• Milkshakes
• Soft drinks

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“Delivering a great restaurant experience every time.”

Leader of the fast-food restaurant industry, with chain restaurants placed in over 100 countries and employing over 4 million workers.

Was founded in America in 1940 and has since then become a household name internationally.

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Provides a more culturally diverse menu depending on the surrounding local community.

COMPANY OVERVIEW

WEAKNESSES

THREAT

STRENGTHS

OPPORTUNITIES

Low product diversification Dependent on Western/US economies

Standardized + limited flexibility in production

Healthy trends

Emphasis on happy employees with less hours

Local fast food chains over national, environmental trends

Economies of scale

Market power

Low prices from suppliers

Wide audience

Brand recognition

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Creating new markets

Technologically forward

Developing new products and food in line with healthy trends

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INDUSTRY OVERVIEW

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INDUSTRY OVERVIEW

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• Part of retail industry
• Worth $256 billion in 2018 in US,
• Expected worth: > $690 billion in 2022
• Annual growth rate of 4.2% (2017-2022)
• Started in 1920s and has been
• Ex. McDonalds, Taco Bell, Wendy’s, Burger King, KFC

Fast Food Industry

FINANCIAL STATEMENTS

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FINANCIAL STATEMENTS

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Income Statement

FINANCIAL STATEMENTS

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Balance Sheet

FINANCIAL STATEMENTS

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Cash Flow Statement

COMPETITOR ANALYSIS

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COMPETITOR ANALYSIS

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CATALYSTS

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Catalysts History

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Gross revenue in the sector

10/2019: MCD 2019 Q3 earnings fell significantly, where we see noticeable drop in price

10/2018: MCD 2018 Q3 earnings was very strong, and we notice some increase in price

11/2019: MCD fires its current CEO for company violation, and we see continued drop in the price

VALUATION

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VALUATION

COMPANY INDUSTRY FINANCIALS COMPETITORS

INVESTMENT CATALYSTS VALUATION OPPORTUNITIES & RISKS

Earnings per share (MCD): 7.62

Price to Earnings (DMZ): 31.28

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(7.62)(31.28)= $238.35

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Using Multiples:

INVESTMENT THESIS

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INVESTMENT THESIS

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Decreasing Overall

Costs

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Expenses have been decreasing on annual basis (span of 2 years =-27.8%) → EBIT (earnings) increase for McDonald’s

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BUY

BUY

• Undervalued

INVESTMENT OPPORTUNITIES AND RISKS

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OPPORTUNITIES

CREATE NEW MARKETS

TECHNOLOGY FORWARD

DEVELOP NEW PRODUCT LINES

Tap into new markets through geographic expansion and food diversification

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Integrate technology to the fullest -- design full experience using mobile and online programs

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Focus on branding new food lines to attract new customers

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RISKS

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Risks Mitigations

RECOMMENDATION:

BUY AT $238.35

CONCLUSION

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HISTORICALLY ADAPTABLE

DECLINING COSTS

UNDER-

VALUED

STOCK

THANKS!

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REFERENCES

• Bloomberg
• Forbes
• Investing.com
• McDonalds
• Securities and Exchange Commission
• Statista
• Strategic Management Insight
• UK Essays
• Yahoo Finance

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