Despite excellent revenue and profit trends through early 2023, both McDonald's (MCD 0.17%) and Procter & Gamble (PG 0.23%) stocks are on sale right now. Wall Street has chosen to focus more on the rebounding tech sector than these stable dividend payers, creating attractive opportunities for patient investors.
Let's take a closer look at which of these two stocks is the better fit for your portfolio right now.
Sales trends
Both companies are posting strong sales results on top of big gains a year ago, but McDonald's easily wins this growth matchup. The fast-food giant said in late April that comparable-store sales rose a blistering 13% this past quarter, showing accelerating gains compared to late 2022.
By comparison, peer Chipotle announced an 11% Q1 comps increase. McDonald's achieved that blazing growth through a mix of higher prices and increased customer traffic.
P&G's growth is weaker right now, with organic sales rising 7% in the first quarter. The consumer staples retailer is also seeing declining volumes, in part due to its aggressive price hikes. Growth-focused investors will find more to like about McDonald's, which is winning market share in a quickly expanding industry right now.
Profit winners
There's less daylight between the two companies when it comes to financial efficiency. Procter & Gamble leads its industry in key metrics like profitability and cash flow. Operating margin rose to more than 22% of sales this past quarter after adjusting for currency exchange rate swings. And the prospects are bright for further gains here as cost inflation slows down in the coming quarters.
PG Operating Margin (TTM) data by YCharts
McDonald's is also a leader in this arena, with operating profit margin recently rising above 45% of sales. The fast-food giant's franchise-selling approach allows it to profit from things like fees and royalty charges, but the foundation of its success is rising demand for its menu products.
"Running great restaurants is fundamental to our business momentum," McDonald's CEO Chris Kempczinski told investors in April.
Cash returns and value
P&G stock seems more attractive from a cash return standpoint. Dividend investors can achieve a 2.6% yield by purchasing shares today, compared to McDonald's 2.1% yield.
P&G is targeting aggressive stock buyback spending this year, too, with total cash returns on track to land at about $17 billion.
The final point to consider is valuation. While both stocks are valued at a premium compared to peers, McDonald's is sitting at a higher perch right now. Shares are trading at over 9 times annual sales, which is close to a record for the fast-food giant. P&G, in contrast, is valued below the level that investors were paying for the business at several points over the last few years.
Both stocks are likely to generate solid long-term returns for shareholders thanks to the companies' competitive and financial strengths.
Growth stock investors might prefer to pay up for McDonald's right now given its solid sales momentum and the prospect of rising margins as consumers tilt spending further toward delivery and drive-thru channels. But P&G is an attractive option if you're looking for a better value, plus ample cash returns.
