I am going to attempt my first stock analysis on McDonald’s Corporation (MCD). I will be getting my information from Nasdaq.com and using their “Nasdaq Dozen” fundamental analysis process. I am going to be trying different methods for analyzing stocks to a) learn about different methods, b) find a method I like, and c) get practice going through a systematic approach as opposed to bouncing between different metrics with little guidance.
- Revenue: In 2013 MCD brought in $28,105,000 but in 2014 only earned $27,441,000. Is it doing better in 2015? It doesn’t look like it. The first and second quarters are both lower than their counterpart from 2014. The first quarter went down by $742,000, and the second quarter revenue was lower by $684,000 (2014 to 2015). Fail
- Earnings Per Share (EPS): Earning per share dropped from $5.55 (2013) to $4.82 (2014). It is also down in the first two quarters of 2015 compared to 2014. 1st Quarter: $1.21 –> $.84. 2nd Quarter: $1.4 –> $1.25. Fail
- Return on Equity (ROE): This shows how well management is producing a return for owners of the company. Ideally, there should be a consecutive increase over two years.
- 2012: 36%
- 2013: 35%
- 2014: 37%
There was a decrease from 2012 to 2013 but an increase from 2013 to 2014. Fail
4. Analyst Recommendation: 27 analysts rated MCD. 7 recommended strong buy, 1 buy, 12 hold, 1 underporm, and 0 sells. I want to call this a Pass, but I will go with a Fail since the consensus is less than a buy as per nasdaq.
5. Earning Surprises: This metric is used to check and see if the company is meeting (or beating!) their expectations. I am happy to say that MCD has exceeded expectations in the past 4 quarters! Pass!
|Fiscal Quarter End||Date Reported||Earnings Per Share*||Consensus EPS* Forecast||% Surprise|
6. Earnings Forecast: Is the Earnings forecast going up year after year? Let’s have a look!
McDonalds gets another pass!
7. Earnings Growth: I want to see if the long term 5 year earnings growth is over 8%. Unfortunately, MCD just misses the mark at 7.53%. Fail
8. PEG Ratio: To receive a pass on this metric the PEG ratio needs to be under 1.0. MCD is currently at 2.76. Fail
9. Industry Price Earnings: This metric compares MCD Price/Earnings to its competitors in the industry.
MCD is at a 20.82 Price/Earnings ratio
Industry is at a 26.70 Price/Earnings ratio
McDonald’s gets another fat Fail!
10. Days to Cover: I am just looking to see if the days to cover is less than 2.0. MCD is currently at 1.77 days to cover. Pass
11. Insider Trading: This is one of my favorite metrics to look at. It’s nice to see if the insiders are buying or selling. All sells shouldn’t be looked at as negative because the person might just be reallocating to (wait for it) diversify! We want to see if the there has been a Net buy vs Net sell over the past 3 months.
In the past 3 months, 13,274 shares were sold whereas 0 shares were bought. Fail
12. Weighted Alpha: First time I have heard of this metric so I will just quote Nasdaq’s description: “Weighted Alpha is a measure of one year growth with an emphasis on the most recent price activity. A positive Weighted Alpha indicates the stock price is moving higher and a negative Weighted Alpha indicates the stock price is moving lower. Naturally, when you are looking at buying a stock, you want to see a stock that is increasing in value, not decreasing in value.”
Read more: http://www.nasdaq.com/investing/dozen/weighted-alpha.aspx#ixzz3mQRHMl62
To pass: positive weighted alpha
To fail: negative weighted alpha
MCD passes with a +3.80
|2. Earnings Per Share (EPS)||FAIL|
|3. Return on Equity (ROE)||FAIL|
|4. Analyst Recommendations||FAIL|
|5. Earnings Surprises||PASS|
|6. Earnings Forecast||PASS|
|7. Earnings Growth||FAIL|
|8. PEG Ratio||FAIL|
|9. Industry Earnings||FAIL|
|10. Days to Cover||PASS|
|11. Insider Trading||FAIL|
|12. Weighted Alpha||PASS|
“Typically, stocks with NASDAQ Dozen ratios of 12:0 to 9:3 are strong candidates for growth, stocks with ratios of 8:4 to 6:6 are moderate candidates for growth and stocks with ratios below 6:6 are poor candidates for growth.”
Read more: http://www.nasdaq.com/investing/dozen/weighted-alpha.aspx#ixzz3mQTZ1nqG
It doesn’t look that great for the golden arches. However, this method did not account for the ever increasing dividend. I enjoyed going through the process but think i’ll look for a different method. It was a great learning experience for me. I am not looking to initiate any positions in MCD in the near future. I just chose to analyze MCD because it was the first stock that entered my mind (probably from drinking too much of their coffee). Does anyone have a favorite method for analyzing stocks?
Hope everyone is having a great start to their week! Almost half way too the weekend! Take care.