Even After the Recent Correction I Still Think McDonald’s Is Overvalued


This article is offered as part of our ongoing FAST Graphs YouTube request series. Although time does not allow me to cover every stock that is requested, I do try to provide analyze out loud videos on stocks that either are currently in the news, or that offer special lessons on valuation. As most of my regular followers will attest, I am very passionate about applying the principles of valuation as part of a sound and prudent long-term investing plan.

In the case of McDonald’s, the company has recently experienced a spate of bad publicity and public relations challenges. For starters, the company fired CEO Steve Easterbrook because of an inappropriate relationship with another employee which was against their policy. Mr. Easterbrook acknowledged that it was indeed time for him to move on as a result because he neglected company values. Nevertheless, this initiated a recent drop in their stock price of approximately 10%.

Furthermore, today it was announced that the company faced a lawsuit in Michigan accusing it of a “systemic problem” of sexual harassment and a toxic work culture. Whether there’s any legs to this lawsuit or not it’s too early to tell. The only reason I mention it and the recent firing of their CEO is to point out that overvalued companies can be very vulnerable to even the hint of bad news.

FAST Graphs Analyze Out Loud Video: McDonald’s

As a result, the following FAST Graphs analyze out loud video will look at McDonald’s based on several widely utilized valuation references. What I will be conveying in the video is my perspective that although this is a great company and a great long-term dividend growth stock, I believe the company is currently overvalued. Consequently, it becomes especially vulnerable to bad news as the recent CEO firing indicates. Normally, I write about stocks that I considered attractive. Therefore, I wanted to be crystal clear that just because I’m producing a video and writing about McDonald’s, does not automatically mean I’m recommending it. If they can be purchased at the right valuation I would be. However, I do not think the current valuation warrants investment currently. Enjoy!

Disclosure: No position.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

© F.A.S.T. Graphs

© F.A.S.T. Graphs

More Factor-Based Investing Topics >