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How Does McDonald’s Valuation Multiple Compare with Its Peers’?

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Dec. 4 2020, Updated 10:53 a.m. ET

Valuation multiple

The rise in McDonald’s (MCD) stock since the beginning of 2019 has also raised its valuation multiple. As of March 26, McDonald’s (MCD) was trading at a forward PE multiple of 22.5x compared to 21.6x at the beginning of 2019.

On the same day, its peers Starbucks (SBUX) and Dunkin’ Brands (DNKN) were trading at forward PE multiples of 25.5x and 24.0x, respectively.

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Analysts’ recommendations

Of the 30 analysts that cover McDonald’s, 80% of them have given it “buy” recommendations, and 20% have given it “holds.” No analysts have given it “sell” recommendations. Analysts’ average 12-month price target stands at $197.60, which implies a rise of 5.5% from its current price of $187.48. On February 19, Stephens upgraded the stock from “equal weight” to “overweight.”

Peer comparison

Of the total 30 analysts that follow Starbucks, 43.3% have given it “buys,” while 53.3% have given it “holds,” and 3.3% have given it “sells.” On average, analysts have given the stock a 12-month price target of $69.40, which represents a fall of 4.9% from its current price of $72.96.

Of the total 26 analysts that follow Dunkin’ Brands, 23.1% have given it “buys,” while 69.2% have given it “holds,” and 7.7% have given it “sells.” Analysts’ average 12-month price target for the stock stands at $69.88, which represents a fall of 4.2% from its current price of $72.96.

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