McDonald’s Corporation (MCD): This Restaurant Giant Plans to Win

The first major peer of McDonalds is Yum! Brands, Inc. (NYSE:YUM). In China, Yum! Brands, Inc. (NYSE:YUM) is also facing challenges due to the avian flu outbreak. Along with the avian flu outbreak, the company’s sales have also been affected by the chicken controversy in China. Its KFC brand faced accusations that it had purchased chicken with extra chemicals and was selling it to the consumer. The company since launched ‘operation thunder’ to recover from this controversy.

The company is looking forward to doubling the annual sales of its Taco Bell brand over the next 6-7 years with unit expansion and new menu additions. The company has launched new products under this brand and is planning to open more than 100 stores per year.

Another competitor, Burger King Worldwide Inc (NYSE:BKW), has very robust plans including its four pillar plan, re-franchising plan and share buyback and dividend payment plans. Under its four pillar plan, the company is looking to strengthen four important parts of business, i.e. menu, market communication, image and operation. The company has completed 97% of franchising, and under the re-franchising initiative franchisees will be given to the best franchiser to operate.

Company P/E ratio Dividend yield P/S ratio
McDonald’s 18.03 3.13 3.51
Yum! 21.98 1.88 2.33
Burger King Worldwide 51.13 1.16 4.12

If we compare the P/E ratio, then that of the Burger King Worldwide is exceptionally high. Its P/S ratio is also very high. It is not a very good sign for the investors. McDonald’s Corporation (NYSE:MCD) seems to be a good choice with the lowest P/E, highest dividend yield and a moderate P/S ratio. Burger King Worldwide Inc (NYSE:BKW) has the lowest dividend yield. Yum! has the lowest P/S ratio, but its dividend yield is also low.

Conclusion

McDonald’s Corporation (NYSE:MCD) is targeting new product launches. The new menu has shown positive results on its US and European same store sales, whereas China’s same store sales are declining due to the avian flu outbreak. It has strategies like ‘Plan to win’ and new packages design, but it will take some time to show the results. In short, the company needs to have a more robust plan to grow. Long term growth will be achieved with the new menu and new package strategies. So I recommend a buy.

The article This Restaurant Giant Plans to Win originally appeared on Fool.com and is written by Gayatri Sharma.

Gayatri Sharma has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald’s. The Motley Fool owns shares of McDonald’s. Gayatri is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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