Our Calculation Of Intrinsic Value: McDonald’s Corporation

Image Source: Pexels ProfileMcDonald’s is one of the world’s largest and most recognizable restaurant brands, operating and franchising more than 40,000 locations across over 100 countries. The company’s business model is anchored by franchising, real estate ownership, and a globally standardized operating system that emphasizes scale, efficiency, and brand consistency.McDonald’s generates the majority of its operating income from franchise royalties, rent, and fees, resulting in highly predictable cash flows and industry-leading margins. Its asset-light structure, dominant global footprint, pricing power, and continuous menu and digital innovation reinforce one of the most durable consumer moats in the global quick-service restaurant industry.DCF AnalysisInputs:Discount Rate: 10%Terminal Growth Rate: 3%WACC: 10%Forecasted Free Cash Flows (in billions USD)2025: $7.5 → PV: $6.82026: $7.8 → PV: $6.52027: $8.1 → PV: $6.32028: $8.4 → PV: $6.12029: $8.7 → PV: $5.9Total Present Value of FCFs = $31.6BTerminal Value CalculationUsing perpetuity growth model with 2029 FCF = $8.7B:TV = (8.7 × 1.03) ÷ (0.10 − 0.03) = $128.0BPresent Value of Terminal Value = $89.2BEnterprise ValueEnterprise Value = 31.6B + 89.2B = $120.8BNet DebtCash & Equivalents: $2.45BTotal Debt: $55.82BNet Debt = $53.37BEquity Value & Per-Share ValueEquity Value = 120.8B – 53.37B = $67.4BShares Outstanding: ~0.71BIntrinsic Value per Share ≈ $95ConclusionDCF Value: $95Current Price: ~$319Margin of Safety: –70%McDonald’s remains a global consumer powerhouse with unmatched scale, pricing power, and free-cash-flow durability. Its franchise-heavy model delivers exceptional margins, capital efficiency, and resilience across economic cycles, supported by strong brand equity and global real estate ownership.However, under conservative DCF assumptions, MCD trades well above intrinsic value, reflecting the market’s willingness to pay a premium for stability, consistency, and long-duration cash flows. While McDonald’s remains one of the highest-quality consumer businesses in the public markets, current valuation offers limited margin of safety despite the company’s exceptional operational durability and cash-generation profile.More By This Author:APA Corporation: Deep-Value Energy StockOur Calculation of Intrinsic Value: Broadcom Inc.Bath & Body Works: Undervalued Retail Leader With Strong FCF