Intrinsic value of McDonald's - MCD

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$153.72

  Intrinsic Value

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  Value-price divergence*

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$153.72

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MCD stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 128.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -3.11
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  24,622
  25,114
  25,692
  26,352
  27,094
  27,915
  28,816
  29,798
  30,860
  32,004
  33,233
  34,547
  35,949
  37,442
  39,028
  40,712
  42,496
  44,385
  46,382
  48,492
  50,720
  53,071
  55,550
  58,164
  60,917
  63,817
  66,871
  70,085
  73,467
  77,025
  80,767
Variable operating expenses, $m
 
  18,052
  18,462
  18,930
  19,455
  20,037
  20,676
  21,372
  22,125
  22,936
  23,806
  24,486
  25,480
  26,538
  27,663
  28,856
  30,120
  31,459
  32,874
  34,370
  35,949
  37,616
  39,373
  41,225
  43,177
  45,233
  47,397
  49,675
  52,072
  54,594
  57,246
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  16,877
  18,052
  18,462
  18,930
  19,455
  20,037
  20,676
  21,372
  22,125
  22,936
  23,806
  24,486
  25,480
  26,538
  27,663
  28,856
  30,120
  31,459
  32,874
  34,370
  35,949
  37,616
  39,373
  41,225
  43,177
  45,233
  47,397
  49,675
  52,072
  54,594
  57,246
Operating income, $m
  7,745
  7,062
  7,230
  7,423
  7,639
  7,878
  8,140
  8,426
  8,735
  9,069
  9,426
  10,061
  10,469
  10,904
  11,366
  11,856
  12,376
  12,926
  13,507
  14,122
  14,771
  15,455
  16,177
  16,938
  17,740
  18,585
  19,474
  20,410
  21,395
  22,431
  23,521
EBITDA, $m
  9,262
  8,744
  8,945
  9,175
  9,433
  9,719
  10,033
  10,374
  10,744
  11,143
  11,570
  12,028
  12,516
  13,036
  13,588
  14,174
  14,795
  15,453
  16,148
  16,883
  17,659
  18,477
  19,340
  20,250
  21,209
  22,219
  23,282
  24,401
  25,578
  26,817
  28,120
Interest expense (income), $m
  874
  844
  736
  759
  784
  813
  845
  880
  918
  959
  1,003
  1,051
  1,101
  1,156
  1,213
  1,275
  1,340
  1,409
  1,482
  1,559
  1,641
  1,727
  1,818
  1,914
  2,015
  2,122
  2,234
  2,352
  2,477
  2,607
  2,745
Earnings before tax, $m
  6,866
  6,218
  6,494
  6,664
  6,854
  7,065
  7,296
  7,546
  7,818
  8,110
  8,423
  9,010
  9,368
  9,748
  10,152
  10,581
  11,036
  11,517
  12,025
  12,562
  13,130
  13,728
  14,359
  15,024
  15,725
  16,463
  17,240
  18,058
  18,918
  19,824
  20,776
Tax expense, $m
  2,179
  1,679
  1,753
  1,799
  1,851
  1,908
  1,970
  2,038
  2,111
  2,190
  2,274
  2,433
  2,529
  2,632
  2,741
  2,857
  2,980
  3,109
  3,247
  3,392
  3,545
  3,707
  3,877
  4,057
  4,246
  4,445
  4,655
  4,876
  5,108
  5,352
  5,609
Net income, $m
  4,687
  4,539
  4,741
  4,865
  5,004
  5,157
  5,326
  5,509
  5,707
  5,920
  6,149
  6,577
  6,838
  7,116
  7,411
  7,724
  8,056
  8,407
  8,778
  9,171
  9,585
  10,021
  10,482
  10,968
  11,479
  12,018
  12,585
  13,182
  13,810
  14,471
  15,166

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,368
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  31,024
  30,853
  31,563
  32,374
  33,285
  34,294
  35,401
  36,606
  37,912
  39,318
  40,826
  42,441
  44,163
  45,997
  47,946
  50,015
  52,206
  54,526
  56,980
  59,572
  62,310
  65,198
  68,244
  71,454
  74,837
  78,400
  82,151
  86,099
  90,254
  94,625
  99,222
Adjusted assets (=assets-cash), $m
  29,656
  30,853
  31,563
  32,374
  33,285
  34,294
  35,401
  36,606
  37,912
  39,318
  40,826
  42,441
  44,163
  45,997
  47,946
  50,015
  52,206
  54,526
  56,980
  59,572
  62,310
  65,198
  68,244
  71,454
  74,837
  78,400
  82,151
  86,099
  90,254
  94,625
  99,222
Revenue / Adjusted assets
  0.830
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
  0.814
Average production assets, $m
  22,187
  24,311
  24,870
  25,509
  26,227
  27,022
  27,894
  28,844
  29,872
  30,980
  32,169
  33,441
  34,798
  36,244
  37,779
  39,409
  41,136
  42,964
  44,897
  46,940
  49,097
  51,373
  53,773
  56,302
  58,968
  61,775
  64,731
  67,842
  71,116
  74,560
  78,183
Working capital, $m
  1,381
  -1,005
  -1,028
  -1,054
  -1,084
  -1,117
  -1,153
  -1,192
  -1,234
  -1,280
  -1,329
  -1,382
  -1,438
  -1,498
  -1,561
  -1,628
  -1,700
  -1,775
  -1,855
  -1,940
  -2,029
  -2,123
  -2,222
  -2,327
  -2,437
  -2,553
  -2,675
  -2,803
  -2,939
  -3,081
  -3,231
Total debt, $m
  25,956
  21,039
  21,677
  22,408
  23,227
  24,135
  25,132
  26,217
  27,391
  28,657
  30,015
  31,468
  33,018
  34,668
  36,423
  38,284
  40,257
  42,345
  44,553
  46,886
  49,350
  51,949
  54,690
  57,580
  60,624
  63,831
  67,207
  70,760
  74,500
  78,433
  82,571
Total liabilities, $m
  33,228
  27,768
  28,406
  29,137
  29,956
  30,864
  31,861
  32,946
  34,120
  35,386
  36,744
  38,197
  39,747
  41,397
  43,152
  45,013
  46,986
  49,074
  51,282
  53,615
  56,079
  58,678
  61,419
  64,309
  67,353
  70,560
  73,936
  77,489
  81,229
  85,162
  89,300
Total equity, $m
  -2,204
  3,085
  3,156
  3,237
  3,328
  3,429
  3,540
  3,661
  3,791
  3,932
  4,083
  4,244
  4,416
  4,600
  4,795
  5,001
  5,221
  5,453
  5,698
  5,957
  6,231
  6,520
  6,824
  7,145
  7,484
  7,840
  8,215
  8,610
  9,025
  9,462
  9,922
Total liabilities and equity, $m
  31,024
  30,853
  31,562
  32,374
  33,284
  34,293
  35,401
  36,607
  37,911
  39,318
  40,827
  42,441
  44,163
  45,997
  47,947
  50,014
  52,207
  54,527
  56,980
  59,572
  62,310
  65,198
  68,243
  71,454
  74,837
  78,400
  82,151
  86,099
  90,254
  94,624
  99,222
Debt-to-equity ratio
  -11.777
  6.820
  6.870
  6.920
  6.980
  7.040
  7.100
  7.160
  7.230
  7.290
  7.350
  7.410
  7.480
  7.540
  7.600
  7.650
  7.710
  7.770
  7.820
  7.870
  7.920
  7.970
  8.010
  8.060
  8.100
  8.140
  8.180
  8.220
  8.250
  8.290
  8.320
Adjusted equity ratio
  -0.120
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,687
  4,539
  4,741
  4,865
  5,004
  5,157
  5,326
  5,509
  5,707
  5,920
  6,149
  6,577
  6,838
  7,116
  7,411
  7,724
  8,056
  8,407
  8,778
  9,171
  9,585
  10,021
  10,482
  10,968
  11,479
  12,018
  12,585
  13,182
  13,810
  14,471
  15,166
Depreciation, amort., depletion, $m
  1,517
  1,682
  1,715
  1,752
  1,794
  1,841
  1,892
  1,948
  2,009
  2,074
  2,144
  1,967
  2,047
  2,132
  2,222
  2,318
  2,420
  2,527
  2,641
  2,761
  2,888
  3,022
  3,163
  3,312
  3,469
  3,634
  3,808
  3,991
  4,183
  4,386
  4,599
Funds from operations, $m
  6,227
  6,221
  6,455
  6,617
  6,798
  6,998
  7,218
  7,457
  7,716
  7,994
  8,293
  8,545
  8,885
  9,248
  9,634
  10,042
  10,476
  10,934
  11,419
  11,932
  12,473
  13,043
  13,645
  14,280
  14,948
  15,652
  16,393
  17,173
  17,994
  18,857
  19,765
Change in working capital, $m
  167
  -20
  -23
  -26
  -30
  -33
  -36
  -39
  -42
  -46
  -49
  -53
  -56
  -60
  -63
  -67
  -71
  -76
  -80
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
  -150
Cash from operations, $m
  6,060
  5,520
  6,478
  6,643
  6,828
  7,031
  7,254
  7,496
  7,758
  8,040
  8,342
  8,597
  8,941
  9,308
  9,697
  10,110
  10,547
  11,010
  11,499
  12,016
  12,562
  13,137
  13,744
  14,384
  15,058
  15,768
  16,515
  17,301
  18,129
  18,999
  19,915
Maintenance CAPEX, $m
  0
  -1,402
  -1,430
  -1,463
  -1,501
  -1,543
  -1,590
  -1,641
  -1,697
  -1,757
  -1,822
  -1,892
  -1,967
  -2,047
  -2,132
  -2,222
  -2,318
  -2,420
  -2,527
  -2,641
  -2,761
  -2,888
  -3,022
  -3,163
  -3,312
  -3,469
  -3,634
  -3,808
  -3,991
  -4,183
  -4,386
New CAPEX, $m
  -1,821
  -474
  -559
  -639
  -718
  -795
  -872
  -950
  -1,028
  -1,108
  -1,189
  -1,272
  -1,357
  -1,445
  -1,536
  -1,630
  -1,727
  -1,828
  -1,933
  -2,043
  -2,157
  -2,276
  -2,400
  -2,530
  -2,665
  -2,807
  -2,956
  -3,111
  -3,274
  -3,444
  -3,623
Cash from investing activities, $m
  -982
  -1,876
  -1,989
  -2,102
  -2,219
  -2,338
  -2,462
  -2,591
  -2,725
  -2,865
  -3,011
  -3,164
  -3,324
  -3,492
  -3,668
  -3,852
  -4,045
  -4,248
  -4,460
  -4,684
  -4,918
  -5,164
  -5,422
  -5,693
  -5,977
  -6,276
  -6,590
  -6,919
  -7,265
  -7,627
  -8,009
Free cash flow, $m
  5,078
  3,644
  4,489
  4,541
  4,610
  4,693
  4,792
  4,906
  5,033
  5,175
  5,331
  5,433
  5,617
  5,816
  6,029
  6,258
  6,502
  6,762
  7,039
  7,332
  7,644
  7,974
  8,322
  8,691
  9,081
  9,492
  9,925
  10,383
  10,864
  11,372
  11,906
Issuance/(repayment) of debt, $m
  2,670
  -3,083
  639
  730
  820
  908
  996
  1,085
  1,175
  1,265
  1,358
  1,453
  1,550
  1,651
  1,754
  1,861
  1,973
  2,088
  2,208
  2,333
  2,463
  2,599
  2,741
  2,890
  3,044
  3,206
  3,376
  3,553
  3,739
  3,934
  4,138
Issuance/(repurchase) of shares, $m
  -10,872
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -8,204
  -3,083
  639
  730
  820
  908
  996
  1,085
  1,175
  1,265
  1,358
  1,453
  1,550
  1,651
  1,754
  1,861
  1,973
  2,088
  2,208
  2,333
  2,463
  2,599
  2,741
  2,890
  3,044
  3,206
  3,376
  3,553
  3,739
  3,934
  4,138
Total cash flow (excl. dividends), $m
  -3,230
  561
  5,128
  5,271
  5,429
  5,602
  5,789
  5,991
  6,208
  6,440
  6,689
  6,886
  7,167
  7,466
  7,783
  8,119
  8,475
  8,850
  9,247
  9,666
  10,107
  10,573
  11,064
  11,581
  12,125
  12,698
  13,301
  13,936
  14,604
  15,306
  16,044
Retained Cash Flow (-), $m
  9,292
  -3,683
  -71
  -81
  -91
  -101
  -111
  -121
  -131
  -141
  -151
  -161
  -172
  -183
  -195
  -207
  -219
  -232
  -245
  -259
  -274
  -289
  -305
  -321
  -338
  -356
  -375
  -395
  -415
  -437
  -460
Prev. year cash balance distribution, $m
 
  7,686
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  4,564
  5,057
  5,190
  5,338
  5,501
  5,678
  5,870
  6,077
  6,300
  6,538
  6,724
  6,995
  7,283
  7,589
  7,912
  8,255
  8,618
  9,002
  9,406
  9,834
  10,284
  10,759
  11,260
  11,787
  12,342
  12,926
  13,541
  14,188
  14,869
  15,584
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  4,273
  4,405
  4,178
  3,942
  3,698
  3,446
  3,188
  2,926
  2,662
  2,398
  2,117
  1,868
  1,629
  1,402
  1,190
  995
  820
  664
  528
  412
  316
  237
  174
  124
  87
  59
  39
  25
  16
  9
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

McDonaldÂ’s Corporation operates and franchises McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company's restaurants offer various food products, soft drinks, coffee, and other beverages. As of December 31, 2015, it operated 36,525 restaurants, including 30,081 franchised restaurants comprising 21,147 franchised to conventional franchisees, 5,529 licensed to developmental licensees, and 3,405 licensed to foreign affiliates; and 6,444 company-operated restaurants. The company has strategic partnerships with CITIC Limited, CITIC Capital, and The Carlyle Group to expand its business in Mainland China and Hong Kong. McDonaldÂ’s Corporation was founded in 1940 and is based in Oak Brook, Illinois.

FINANCIAL RATIOS  of  McDonald's (MCD)

Valuation Ratios
P/E Ratio 26.9
Price to Sales 5.1
Price to Book -57.1
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow 29.7
Growth Rates
Sales Growth Rate -3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0.4%
Cap. Spend. - 3 Yr. Gr. Rate -8.4%
Financial Strength
Quick Ratio 18
Current Ratio 0.4
LT Debt to Equity -1174.2%
Total Debt to Equity -1177.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 15.3%
Ret/ On Assets - 3 Yr. Avg. 14.5%
Return On Total Capital 17.1%
Ret/ On T. Cap. - 3 Yr. Avg. 16.3%
Return On Equity 191.9%
Return On Equity - 3 Yr. Avg. 90.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 41.4%
Gross Margin - 3 Yr. Avg. 39.4%
EBITDA Margin 37.6%
EBITDA Margin - 3 Yr. Avg. 35.7%
Operating Margin 31.5%
Oper. Margin - 3 Yr. Avg. 29.5%
Pre-Tax Margin 27.9%
Pre-Tax Margin - 3 Yr. Avg. 26.8%
Net Profit Margin 19%
Net Profit Margin - 3 Yr. Avg. 18.1%
Effective Tax Rate 31.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 65.2%

MCD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCD stock intrinsic value calculation we used $24622 million for the last fiscal year's total revenue generated by McDonald's. The default revenue input number comes from 2016 income statement of McDonald's. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MCD stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.8%, whose default value for MCD is calculated based on our internal credit rating of McDonald's, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of McDonald's.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MCD stock the variable cost ratio is equal to 71.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MCD stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for McDonald's.

Corporate tax rate of 27% is the nominal tax rate for McDonald's. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MCD stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MCD are equal to 96.8%.

Life of production assets of 17 years is the average useful life of capital assets used in McDonald's operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MCD is equal to -4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7088 million for McDonald's - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 834.793 million for McDonald's is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of McDonald's at the current share price and the inputted number of shares is $128.3 billion.


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COMPANY NEWS

▶ McDonald's and three more Illinois companies score high on patriotism   [Jun-27-17 03:25PM  American City Business Journals]
▶ Why Amazon Won't Kill McDonald's   [Jun-25-17 05:00PM  TheStreet.com]
▶ The Minimum-Wage Job-Killer Strikes Again!   [Jun-23-17 05:37PM  Investor's Business Daily]
▶ What might have prompted McDonald's to end Olympics sponsorship   [02:25PM  American City Business Journals]
▶ How Shake Shack's Growth May Actually Catch Up To Its Hype   [08:37AM  Investor's Business Daily]
▶ McDonald's restaurants in Hawaii using Snapchat partnership to boost recruitment   [Jun-21-17 09:53PM  American City Business Journals]
▶ Food & pharma in the trader blitz   [07:57AM  CNBC Videos]
▶ Five classic Dow stocks are surging   [05:35PM  CNBC Videos]
▶ McDonald's is taking its biggest risk in history   [04:22PM  Business Insider]
▶ Cheap Eats, Mobile Ordering Seen Giving McDonald's Edge   [04:11PM  Investor's Business Daily]
▶ McDonalds recruits on Snapchat   [02:19PM  Reuters Videos]
▶ Wendy's dethroned by Burger King in annual customer satisfaction survey   [11:20AM  American City Business Journals]
▶ What Happened to Coffee Last Week   [10:49AM  Market Realist]
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▶ Stocks Open Lower; Mickey D. Upgraded, Lennar Breaks Out   [09:35AM  Investor's Business Daily]
▶ Better Buy: McDonald's Corporation vs. YUM! Brands, Inc.   [Jun-19-17 08:40PM  Motley Fool]
▶ [$$] McDonalds, IOC End Olympic Partnership Early   [12:09AM  The Wall Street Journal]
▶ McDonald's ends Olympics sponsorship deal early   [Jun-16-17 03:00PM  Reuters]
▶ [$$] DVD: The Founder - 'finely shaded'   [01:22PM  Financial Times]
▶ McDonald's suddenly exits as an Olympics sponsor   [12:44PM  American City Business Journals]
▶ [$$] McDonald's, IOC End Olympic Partnership Early   [12:08PM  The Wall Street Journal]
▶ McDonald's breaks up with Olympics   [11:11AM  Reuters Videos]
▶ [$$] McDonald's ends Olympic Games sponsorship   [08:44AM  Financial Times]
▶ 2 Big-Cap Plays Near Breakout See Tasty Gains From McDonald's   [08:00AM  Investor's Business Daily]
▶ Credit Suisse Picks Its Top Restaurant Stocks   [Jun-15-17 03:40PM  Investopedia]
▶ The Upside of the Big McDonald's Delivery Experiment   [Jun-14-17 06:15PM  Motley Fool]
▶ 3 Top Big Brand Stocks to Buy Now   [12:16PM  Motley Fool]
▶ McDonalds Uses Snapchat to Add 250,000 Summer Jobs   [Jun-12-17 07:35PM  24/7 Wall St.]
▶ How McDonald's is using Snapchat to hire summer workers in New York   [02:40PM  American City Business Journals]
▶ Super Spice Me   [11:36AM  The Wall Street Journal]
▶ Fast Food Frenzy: 5 trades   [Jun-09-17 05:00PM  CNBC Videos]
▶ What Starbucks Can Do For A 5,000-Year-Old Civilization   [04:23PM  Investor's Business Daily]
Stock chart of MCD Financial statements of MCD Annual reports of MCD
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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