McDonald’s Corporation (MCD) and Its Peers Are Not Cheap

We can also compare McDonald’s Corporation (NYSE:MCD) to Jack in the Box Inc. (NASDAQ:JACK) and to fellow large cap quick service restaurant Yum! Brands, Inc. (NYSE:YUM). Valuations are high here as well, though with trailing P/Es in the 20-23 range the premium to McDonald’s on those terms is fairly small. Revenue growth numbers in these companies’ most recent quarter compared to the fourth quarter of 2011 was also very low, though Jack in the Box Inc. (NASDAQ:JACK) has been doing better on the bottom line. Using the same process from Wendy’s and Burger King that restaurant has a decent annualized most recent quarter P/E. Yum! Brands, Inc. (NYSE:YUM), which is highly exposed to macro conditions in China, actually experienced a decline in net income though analyst expectations are that earnings will grow over the next couple years

Quick service restaurants, including McDonald’s, seem to have too high valuations to make them attractive value stocks right now. Many are looking more moderately priced if we only look at their most recent quarter’s earnings- and so shorting may be of high risk if that turns out to be normal for these companies going forward- but one quarter of decent results doesn’t really justify buying. The only condition under which any of these stocks look like good buys is if McDonald’s Corporation (NYSE:MCD) fits what an investor is looking for on income or defensive grounds.

Disclosure: I own no shares of any stocks mentioned in this article.