World’s biggest fast food company in terms of revenue has performed really well over the last few years. McDonald’s (MCD) is up nearly 30% YTD and is valued at $128 billion.
In this article, I will give you my take on the stock and explain why the stock is not done going up yet.
Source: Technology and Operations Management
Industry Sentiment & Outlook
First of all, it is important to look at leading indicators to determine where a certain industry is headed. In this case, we are talking about the non-manufacturing industry called ‘accommodation & food services’. I use the leading data from the ISM non-manufacturing report which reports how a certain industry is performing.
The next graph shows you the monthly performance of this industry compared to other non-manufacturing industries. A bar close or at 100% means that the industry is among the biggest gaining in terms of sentiment. A value close to -100% means the opposite.
This graph shows that accommodation and food service companies had the highest sentiment in July. Growth sentiment is back at 2014 levels when we saw similar momentum and strength.
Monthly sentiment can also be displayed in a slightly different way. The next graph uses an accumulation of every month’s sentiment. This displays the bigger trend and can be compared to a stock price.
What we see is massive support since 2014. The entire stock price acceleration has been supported by rising sentiment. This makes the current dip look like another BTFD (buy the F****** dip) opportunity.
Strong Sales Performance
It would be easy to just go and buy the stock based on leading sentiment data. Yes, the foundation is strong, but it is very important to assess whether a company is living up to the expectations and able to grow further in a strong environment.
McDonald’s is doing exactly what we want it to do. It is dominating this environment. Global comps were up 6.6% in the second quarter of this year versus one year ago. The guest count went up 3%….