MCD Analysis: McDonald's $235 Billion Franchise Empire Nears Its 52-Week High — Why the World's Most Famous Real Estate Play Still Delivers

McDonald's trades at 27.5x trailing earnings and roughly 25.2x its most recent annualised quarter, placing it at the upper end of its historical range. The enterprise value-to-EBITDA ratio stands at approximately 87x on a trailing-quarter basis, though this figure is inflated by the lumpy nature of quarterly depreciation reporting — the full-year figure is closer to 20x.

The stock's price-to-sales ratio of 31x looks extreme on its face, but it reflects McDonald's unusual business model: the company earns high-margin franchise fees and rental income rather than selling food directly. What matters more is the price-to-free-cash-flow ratio, which currently sits around 33x based on 2025's $7.2 billion in FCF. That's rich by any standard, but it's the price investors have consistently been willing to pay for McDonald's unmatched cash flow durability.

The dividend yield of approximately 2.3% (based on the annualised quarterly payout of $1.77 per share) is modest but well-covered, with a payout ratio around 61%. McDonald's has room to continue growing the dividend, though the pace may slow given the current valuation.

McDonald's delivered $26.9 billion in revenue for full-year 2025, with a clear seasonal pattern: Q1 is typically the weakest ($5.96 billion) while Q3 tends to be the strongest ($7.08 billion). The fourth quarter came in at $7.01 billion with net income of $2.16 billion and EPS of $3.03.

Gross margins remained remarkably stable throughout the year, ranging from 55.8% in Q4 to 58.0% in Q3. Operating margins told a similar story, fluctuating between 44.5% (Q1) and 47.4% (Q3). This consistency is the hallmark of a franchise model where the franchisor collects fees and rent regardless of individual restaurant-level volatility.

Net income for the full year reached $8.56 billion, up from $8.22 billion in 2024, representing a 4.1% increase. Diluted EPS grew from $11.39 to $11.95, a 4.9% improvement aided modestly by share buybacks.

McDonald's balance sheet is unlike most companies. Total debt stands at $68.3 billion against just $774 million in cash, producing net debt of $67.5 billion. Stockholders' equity is negative $1.8 billion. On the surface, this looks alarming. In practice, it's by design.

McDonald's deliberately operates with negative equity because it has returned far more capital to shareholders through buybacks and dividends than it has retained. Since 2017, the company has repurchased over $30 billion in stock. The business doesn't need equity on the balance sheet because its franchise model generates enormous, predictable cash flows that comfortably service the debt.

Interest coverage remains healthy at 7.7x, meaning operating income covers interest expense nearly eight times over. McDonald's $410 million quarterly interest expense is large in absolute terms but small relative to its $3.2 billion in quarterly operating income.

The real story is the cash flow statement. Operating cash flow hit $10.55 billion in 2025, up from $9.45 billion in 2024. Capital expenditure was $3.37 billion, leaving $7.19 billion in free cash flow. The company returned $7.17 billion to shareholders — $5.12 billion in dividends and $2.06 billion in buybacks — essentially distributing 100% of its free cash flow.

McDonald's competitive advantage is often misunderstood. The company is not primarily a fast-food operator — it is a real estate company that happens to sell hamburgers. McDonald's owns or controls the land and buildings for the vast majority of its approximately 41,000 global locations. Franchisees pay rent to McDonald's, creating a recurring, high-margin revenue stream that is largely insulated from food cost inflation and labour market pressures.

The property, plant, and equipment on McDonald's balance sheet is valued at $42.8 billion at cost, but the market value of this real estate portfolio is estimated to exceed $120 billion. This hidden asset value provides a significant margin of safety that doesn't appear in traditional valuation metrics.

McDonald's faces competition from Burger King, Wendy's, Chick-fil-A, and a growing array of fast-casual concepts. However, its scale advantages are formidable: the company's advertising spend, supply chain negotiating power, and brand recognition create barriers to entry that no competitor can fully replicate. The company's digital transformation — including mobile ordering, delivery partnerships, and loyalty programmes — has added a technology moat on top of the physical one.

One risk worth monitoring is menu price inflation. McDonald's has raised prices significantly in recent years, and there are signs that value-conscious consumers are pushing back. The company's emphasis on value meals and promotional pricing in 2025 suggests management is aware of this sensitivity.

Analyst consensus estimates project continued moderate growth for McDonald's through 2028. Quarterly revenue estimates for 2028 range from $7.37 billion (Q1) to $8.37 billion (Q3), implying full-year revenue of approximately $32.2 billion — representing roughly 6% annualised growth from 2025 levels.

EPS estimates for 2028 average $3.35 to $4.14 per quarter depending on the period, suggesting full-year EPS of approximately $15.45. That would represent 8-9% annualised EPS growth from 2025's $11.95, driven by a combination of revenue growth, margin stability, and continued share buybacks.

At the current price of $329.23, applying the projected 2028 EPS of $15.45 would put the stock at roughly 21x forward earnings two years out — a more reasonable multiple that suggests the market is pricing in the expected growth rather than paying an exorbitant premium.

The next earnings announcement is scheduled for April 30, 2026. Key catalysts to watch include global same-store sales trends (particularly in international markets), progress on restaurant openings (McDonald's targets 1,800-2,000 new locations annually), and any changes to capital allocation priorities.

Recent insider activity includes the CMO selling $1.55 million in stock at $331 per share on February 12. While insider sales near all-time highs are not unusual, they bear watching in the context of the stock's elevated valuation.

McDonald's 50th consecutive annual dividend increase places it in an exclusive club of Dividend Aristocrats with half a century of unbroken hikes. The current annualised dividend of approximately $7.08 per share yields 2.1% at today's price — not eye-catching in a world of 4%+ Treasury yields, but the growth trajectory tells a different story.

Over the past decade, McDonald's has grown its dividend at a compound annual rate of roughly 8%, more than double the rate of inflation. The 61% payout ratio provides comfortable coverage, and the company's FCF of $7.19 billion dwarfs the $5.12 billion in annual dividend payments.

For income investors, the total return proposition is compelling: a 2.1% starting yield growing at 7-8% annually, plus modest capital appreciation as the business expands. An investor who bought McDonald's a decade ago would now be collecting a yield-on-cost approaching 5%, with a stock price that has more than doubled.

The risk is that the starting yield is historically low. If interest rates remain elevated or if McDonald's growth disappoints, the stock could de-rate, compressing returns. But for investors with a multi-year time horizon, McDonald's track record of compounding through economic cycles is hard to match.