Numbers growing from strength to strength
Top-line and bottom-line numbers increased 14% to $7.2 billion and 8.6% to $1.5 billion, respectively, over the year-ago third quarter. The big drivers of McDonalds' growth have been strong same-store sales, up 5%, and its successful expansion in China.
McDonald's has been eyeing the emerging markets, Russia and China in particular. Its entry into Russia was like discovering a treasure trove. The country's burgeoning middle class has lots to offer to this fast-food giant. The company's global same-store sales rose 5.5% in October, heavily influenced by this emerging market growth.
In China, Mickey D's faces some heavy competition from 4,000 Yum! Brands'
Few companies have a consistent history like McDonald's. It not only has an unfailing record of paying quarterly dividends, but it also raised dividends every year since its inception. It recently raised its quarterly dividend by 15%. Peers like Yum! Brands and Brinker International
What's the secret?
One large reason behind its success is actually pretty simple. McDonald's has the ability to see the world through others' eyes and identify their culture, needs, tastes, and preferences. The company keeps molding its menu across regions. These moves make the restaurants locally relevant. Be it the Big Mac in U.S., McAloo Tikki in India, or Samurai Pork Burger in Thailand, McDonald's always generates local interest. Prices are also kept reasonable to cater to a wide range of customers.
But is the stock cheap enough to include it in one's portfolio and be part of its success?
A comparative picture
I would like to take a look at the following two metrics to check if the stock is reasonably priced when compared to its peers.
Source: S&P Capital IQ. *Negative earnings.
The restaurant industry in general is trading at a higher valuation than the rest of the market. It's mainly because food retailers are posting strong results in a tough economy. McDonald's overall is still cheaper than its peers. Paying these kinds of multiples for a stock like McDonald's is quite reasonable.
The Foolish bottom line
McDonald's leaves no opportunity to delight its customers and shareholders on the table. Let's not kid ourselves -- it may not provide the best of food and awesome chefs, but it is consistent with what it does, be it the rising revenues or the delicious dividend. It consistently thinks outside the box, experiments, fails, and learns from it. So you need not be the best to be the best. You simply need to be McDonald's.
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