McDonald’s (MCD) reported second quarter earnings results back on July 26. The company reported earnings of $2.05 per share on the quarter and that matched the estimates of analysts. Initially the stock moved higher after the report, but it pulled back with the rest of the market over the past week.
Over the last three years, the company has been averaging earnings growth of 15% per year and the second quarter results were up 3% from the previous year. Sales have been declining by 7% per year over the last three years and they were flat in the second quarter of 2019 compared to the second quarter of 2018. The sales results are being impacted by the company’s plans to shift locations from corporate ownership to more franchise status.
Looking at the company’s management efficiency measurements we see a profit margin of 28.3% and an operating margin of 41.8%. I looked at three different sites for a return on equity, but none of them had an ROE for McDonald’s. Regardless, the margins are well above average. It is also worth noting that the company doesn’t have any long-term debt.
As far as valuations for McDonald’s, the P/E ratio is a very reasonable 28.2 and the stock is trading at a discount to its book value.
As far as the technical picture, the stock has performed very well over the last three years. It has been trending higher within a trend channel on the weekly chart and the stock was at the upper rail of that channel ahead of earnings. The more immediate outlook is on the daily chart and it shows how the stock has been climbing in the last six months. Like on the weekly chart, the daily chart shows a trend channel defining the various cycles within the overall trend.
The stock dropped to the lower rail of the channel in the past week and that rail was formed by connecting the lows from February and May.
We also see that the daily stochastic readings dipped down to oversold territory in the past week and made a bullish crossover on August 2. In addition to this bullish signal, the Tickeron overview for McDonald’s shows other bullish signs for the stock.
We this from that overview:
MCD in Uptrend: price expected to rise as it breaks its lower Bollinger Band on July 31, 2019.
This price move signals that MCD may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options. In 22 of 31 cases where MCD's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued Uptrend are 71%.
Tickeron’s Trend Prediction Engine also generated a bullish signal for the stock on August 1 and that signal showed a confidence level of 72%. The signal calls for a gain of at least 4% within the next month.
Looking at the sentiment indicators for McDonald’s we see average readings for the stock. There are 31 analysts following the stock and 24 of them have the stock rated as a “buy”. The other seven have the stock rated as a “hold”. With 77% of all ratings being buy ratings, the buy percentage is slightly above average.
The short-interest ratio for the stock is at 2.5 currently with 6.8 million shares sold short and average daily trading volume of 2.78 million. The number of shares sold short-changed very little from the end of June through the middle of July.
The RSI Indicator for MCD moved out of oversold territory on June 01, 2023. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 18 similar instances when the indicator left oversold territory. In of the 18 cases the stock moved higher. This puts the odds of a move higher at .
The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. of 50 cases where MCD's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
MCD moved above its 50-day moving average on June 02, 2023 date and that indicates a change from a downward trend to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where MCD advanced for three days, in of 333 cases, the price rose further within the following month. The odds of a continued upward trend are .
MCD may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 383 cases where MCD Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
The Momentum Indicator moved below the 0 level on May 15, 2023. You may want to consider selling the stock, shorting the stock, or exploring put options on MCD as a result. In of 100 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for MCD turned negative on May 03, 2023. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 51 similar instances when the indicator turned negative. In of the 51 cases the stock turned lower in the days that followed. This puts the odds of success at .
The 10-day moving average for MCD crossed bearishly below the 50-day moving average on June 02, 2023. This indicates that the trend has shifted lower and could be considered a sell signal. In of 18 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where MCD declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 84, placing this stock better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (8.694). P/E Ratio (31.056) is within average values for comparable stocks, (163.145). MCD's Projected Growth (PEG Ratio) (3.545) is slightly higher than the industry average of (2.118). Dividend Yield (0.021) settles around the average of (0.032) among similar stocks. P/S Ratio (9.091) is also within normal values, averaging (50.707).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. MCD’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
an operator of food restaurant chain
A.I.dvisor indicates that over the last year, MCD has been loosely correlated with YUM. These tickers have moved in lockstep 65% of the time. This A.I.-generated data suggests there is some statistical probability that if MCD jumps, then YUM could also see price increases.