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McDonald’s: Credit Suisse’s Rating Drove Its Stock Price

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Jun. 26 2019, Updated 8:20 a.m. ET

McDonald’s

After Credit Suisse’s “outperform” rating on June 25, McDonald’s (MCD) stock rose to a 52-week high of $206.39 before closing the day at $205.71—a rise of 0.9% from the closing price of $203.92 the previous day. McDonald’s has returned 15.8% YTD (year-to-date). McDonald’s stock price was driven by its strong first-quarter performance, investors’ optimism about implementing technological advancements to improve customers’ experience, and the acquisition of Dynamic Yield for $300 million on March 26. To learn more, read McDonald’s: Key Takeaways from Its Q1 Earnings.

During the same period, the S&P 500 Index has increased 16.4%. Starbucks (SBUX), Wendy’s (WEN), and Restaurant Brands International (QSR) have returned 30.8%, 24.7%, and 33.1%, respectively.

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Valuation multiple

The rise of 15.8% in McDonald’s stock price since the beginning of 2019 has raised its valuation multiple. As of June 25, McDonald’s was trading at a forward PE ratio of 24.7x—compared to 21.6x at the beginning of 2019. Starbucks, Wendy’s, and Restaurant Brands International were trading at a forward PE ratios of 28.1x, 28.2x, and 24.6x, respectively, on June 25.

McDonald’s was trading at 25.7x analysts’ 2019 EPS estimate of $8.01 and at 23.6x analysts’ 2020 EPS estimate of $8.63. The company’s EPS is expected to rise 1.4% in 2019 and 8.6% in 2020.

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