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Mcdonalds

Healthy Financials:
One of the core competencies of McDonald’s “Plan to Win,” is a goal to strive and
adhere to strict financial discipline. McDonald’s is able to obtain Revenues of $4,802.8 million
in just the first quarter of 2005, by managing costs and using their large amounts of cash flows to
reinvest in the company. The reinforcement of this action enable McDonald’s to strength their
balance sheet, and company.
Recently, McDonald’s has been a leader in adopting accounting polices such as FASB
No. 123. In addition to the current expensing of stock options, they have also ceased using
straight line depreciation for their rent expense and changed to an amortize improvements of the
leased property. The end result of this change has accelerated recognition of rent expense, and
also resulted in a tax benefit of $179 million.
Valuation:
After extensive valuation and analysis, it is conclusive that McDonald’s actual share
price is currently undervalued. The analysis conducted compared McDonald’s to competitors in
the industry on a number of relevant factor and ratios, as well as the use of past financial data to
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forecast and predict the future growth of McDonald’s Corporation. As of April 1, 2005 the
actual closing share price was $31.00; however, our valuations predict the company to grow as
estimated 10-15% driving the growth of the share price to a range of $35-$40 per share. Foods
are a defensive stock, being that they are usually that of slightly slower growth, but they are less
susceptible to adverse market swings. With the recent quarter press release already showing
favorable signs of growth, it makes McDonald’s an attractive company to currently invest in
with promising revenue and earnings growth.
Looking Good on other Criteria:
McDonald’s stock prices have produced the highest percentage growth of the industry.
The past year their stock prices grew by about 23.3%. Also, at the end of this quarter
McDonald’s announced that they...