A Financial Analysis of McDonalds
Autor: cchukes • February 28, 2016 • Research Paper • 1,065 Words (5 Pages) • 960 Views
Christopher Chukes
July 11, 2014
A Financial Analysis of McDonald’s Corporation
FINC 5000 – Finance – Prof. Strandine
A Financial Analysis of McDonald’s Corporation
The McDonald’s Corporation is a well-developed multinational company that conducts business in 119 countries serving about 70 million customers daily. The company and its franchisees have operated in the highly demanding and competitive fast food industry since May 19, 1940. As stated in the company’s mission statement, “McDonald’s competes on the basis of price, convenience, service, menu variety and product quality in a highly fragmented global restaurant industry. The company faces many risks, such as foreign exchange rates, interest rates, inflation, and industry regulations. In addition, current economic conditions described as “slow economies, high unemployment, declining wages, constrained credit, and volatile financial markets” make it even harder to compete in the marketplace. Based on the company’s strategy, “Our ability to remain a relevant and trusted brand and to increase sales and profits depends largely on how well we execute the Plan to Win and our global growth priorities.
The McDonald’s Corporation has gained a competitive advantage in both the national and international fast food industry. McDonald’s net income climbed from $4.9 billion in 2010 to $5.5 billion in 2011, decreased from $5.5 billion in 2011 to $5.4 billion in 2012, representing a 1% decrease, and increased from $5.4 billion in 2012 to $5.6 billion in 2013, which was a 2% increase. If McDonald’s continues in this upward trend, we can expect net income to increase to $5.7 billion in 2014.
The following target summary shows predictions for McDonald’s stock prices. The low target for stock of McDonald’s is $95.00, while the mean target is $106.78. The “close” price at which McDonald’s stock was traded on December 31, 2013 was $97.03.
Price Target Summary | |
Mean Target | $106.78 |
Median Target | $106.00 |
High Target | $120.00 |
Low Target | $95.00 |
My examination of McDonald’s financial statements and calculation of its basic ratios are useful tools in determining current conditions of the company. As a benchmark for this analysis, I have selected a few of McDonald’s competitors. The competitors chosen are Good Times Restaurants Inc., Jack in the Box Inc., Burger King Worldwide, and YUM Brands, which consist of Taco Bell, KFC, Pizza Hut, and Wingstreet restaurants. The following chart depicts the trend in McDonald’s stock prices relative to its competitors from January 4, 2013 to December 31, 2013. Over this period McDonald’s stock price climbed 8% or $7.18 per share from $89.85 to $97.03. Likewise, Yum Brands price climbed 10.6% or $7.29 per share from $68.32 to $75.61. Jack in the Box soared 71% or $20.80 per share from $29.22 to $50.02. For this time period, McDonald’s had both a lower per share increase and growth rate.
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