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Profile

McDonald’s is one of the world’s largest and most recognizable restaurant brands, operating and franchising more than 40,000 locations across over 100 countries. The company’s business model is anchored by franchising, real estate ownership, and a globally standardized operating system that emphasizes scale, efficiency, and brand consistency.

McDonald’s generates the majority of its operating income from franchise royalties, rent, and fees, resulting in highly predictable cash flows and industry-leading margins. Its asset-light structure, dominant global footprint, pricing power, and continuous menu and digital innovation reinforce one of the most durable consumer moats in the global quick-service restaurant industry.

DCF Analysis

Inputs:

Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%

Forecasted Free Cash Flows (in billions USD)

2025: $7.5 → PV: $6.8
2026: $7.8 → PV: $6.5
2027: $8.1 → PV: $6.3
2028: $8.4 → PV: $6.1
2029: $8.7 → PV: $5.9

Total Present Value of FCFs = $31.6B

Terminal Value Calculation

Using perpetuity growth model with 2029 FCF = $8.7B:

TV = (8.7 × 1.03) ÷ (0.10 − 0.03) = $128.0B
Present Value of Terminal Value = $89.2B

Enterprise Value

Enterprise Value = 31.6B + 89.2B = $120.8B

Net Debt

Cash & Equivalents: $2.45B
Total Debt: $55.82B
Net Debt = $53.37B

Equity Value & Per-Share Value

Equity Value = 120.8B – 53.37B = $67.4B
Shares Outstanding: ~0.71B
Intrinsic Value per Share ≈ $95

Conclusion

DCF Value: $95
Current Price: ~$319
Margin of Safety: –70%

McDonald’s remains a global consumer powerhouse with unmatched scale, pricing power, and free-cash-flow durability. Its franchise-heavy model delivers exceptional margins, capital efficiency, and resilience across economic cycles, supported by strong brand equity and global real estate ownership.

However, under conservative DCF assumptions, MCD trades well above intrinsic value, reflecting the market’s willingness to pay a premium for stability, consistency, and long-duration cash flows. While McDonald’s remains one of the highest-quality consumer businesses in the public markets, current valuation offers limited margin of safety despite the company’s exceptional operational durability and cash-generation profile.

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