Is McDonald’s Corporation (MCD) overvalued?
On Equity Rank's model estimate, MCD trades 12% above its fair value. McDonald’s Corporation (MCD) last closed at $276.52; the multi-method model fair value is $247.83.
| Price | Model fair value | Price vs model |
|---|---|---|
| $276.52 | $247.83 | 12% above |
What the answer rests on
- 2 of 7 valuation methods put MCD's value above its price and 5 put it below, so the methods disagree.
- To justify today's price, MCD's free cash flow would need to grow about 4.2% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 9.4% a year.
- MCD trades at 22.8 times its last year's earnings, against a median of 28.0 for 28 profitable Restaurants companies.
- Over the past year the price sat below the model fair value on 1% of trading days. The gap ranged from 13% below to 20% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind MCD's fair value · What prices assume · Other companies