How many times do stock gurus have to tell us to pay attention to our own back yards if we want to find investment ideas? McDonald's
And even though the food and atmosphere at my neighborhood Mickey D's has improved remarkably, it didn't occur to me to look at the stock. Oh, how I wish I had. The turnaround instigated by the dearly departed Jim Cantalupo continues to reward investors who were paying attention.
Yesterday's earnings release is an amazing piece of work for a company as big as McDonald's. Revenues were up a modest 10% to $4.7 billion, though 3% of the bump-up was owed to current fluctuations. Still, near-1% gains in margins led to a 27% improvement in earnings per share. (The $0.47 per stub looks 5% better than it would without those same currency fluctuations.)
Same-store sales worldwide grew by just more than 9%, except for in Europe, where a slimmer 4.4% increase was credited to more sales of meal-sized salads. That's a better turnout than even solid-lookingWendy's
While McDonald's healthier attitude has the firm running strong, it's trickier to decide whether shareholders will continue to be rewarded by management's plans for debt pay-downs and share repurchases. At a price-to-earnings ratio of around 21, shares are in the middle of their historical range. That looks like a fair value given the modest revenue growth the firm is booking these days. Food fans looking for spicier quick-serve growth prospects may want to take a peek at Sonic
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