McDonald’s Corporation (MCD)’s Role As A Bellwether

Sonic currently trades at a P/E of 20.35 versus a five-year average of 20.33.  The company does not currently pay a dividend but does have a history of strong operating cash flows.  The company trades at a price/sales ratio of 1.69.

Foolish bottom line

McDonald’s Corporation (NYSE:MCD) appears fully-valued at current price levels.  While the strong dividend yield is attractive, the performance in the most recent quarter raises some concerns.  I would not put money in the stock at these levels.

While the Doritos Locos Taco has had a profound impact on my life, the issues YUM faces in China make the investment too risky.  The company believes that the negative press will blow over, and maintains its aggressive store expansion plans in China.  While the stock price could come back, the performance in the most recent quarter demonstrates just how serious the supply chain issue was.  Until Yum provides financial results that signal the China issues are behind them, I would not put money in the company.

Sonic is the most appealing of the three companies.  It has plenty of room to grow, and the most recent quarter demonstrates building financial strength.  The company has the most appealing P/E ratio, relative to historical precedence and a low price/sales ratio.  Sonic makes a very interesting investment opportunity for an investor with a long-term horizon.

The article Putting Your Money Where Your Mouth Is originally appeared on Fool.com.

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