Fast Food Mainstay McDonald’s Faces A Debt Problem

Summary:

  • McDonald’s has significant debt and negative shareholder equity, but maintains a current ratio above 1.0, indicating responsible capitalization for now.
  • The company faces risks from high debt, competition, and inflation, which could impact profitability and credit rating.
  • McDonald’s generates steady income with a growing dividend yield of 2.27%, but its P/E ratio is higher than the sector median.
  • I rate McDonald’s a hold due to its high debt and current price levels, recommending caution and potential profit-taking if bought at a lower price.

McDonald"s Building Exterior

M. Suhail

One of my earliest memories was going to McDonald’s. It was the early 80s, New Coke was just becoming a thing, and going to get fast food was a special treat we did probably more often than would be advisable. Still, it

Cash and Equivalents

$792 million

Total Current Assets

$4.2 billion

Total Assets

$53.8 billion

Total Current Liabilities

$3.9 billion

Long-Term Debt

$38.5 billion

Total Shareholder Equity

($4.8 billion)

2021

2022

2023

2024 (1H)

Total Revenues

$23 billion

$23 billion

$25.5 billion

$12.6 billion

Operating Income

$10.3 billion

$9.4 billion

$11.6 billion

$5.6 billion

Net Income

$7.5 billion

$6.2 billion

$8.5 billion

$3.9 billion

Diluted EPS

$10.04

$8.33

$11.56

$5.46

dividend

$5.25

$5.66

$6.23

$3.34


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.


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