Starbucks Corporation (SBUX), McDonald’s Corporation (MCD): Predicting the Future.. With Coffee?

Betting on the laggard

It’s important to note that McDonald’s Corporation (NYSE:MCD) won’t have the same growth rate and success as Starbucks Corporation (NASDAQ:SBUX) will in Asia. Both companies are highly reliant on Asia for growth, however, and it’s what investors are looking towards to validate each stock.

Even though McDonald’s Corporation (NYSE:MCD) doesn’t have the best business model, its lagging performance also presents an opportunity. McDonald’s is priced at 18 times its earnings, whereas Starbucks Corporation (NASDAQ:SBUX) is nearly twice as expensive: it is valued at 35 times its earnings. Using the home-run results from Starbuck’s third quarter earnings release and an earnings surprise rate similar to that of McDonald’s, we can predict with some likelihood that McDonald’s will report a great third quarter. And given the stock’s low price-to-earnings ratio relative to Starbucks, this looks like a great value play to bet on the expansion of consumer spending in Asia.

Ryan Gilbert has no position in any stocks mentioned. The Motley Fool recommends McDonald’s and Starbucks. The Motley Fool owns shares of McDonald’s and Starbucks.

The article Predicting the Future.. With Coffee? originally appeared on

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.