Better Buy: McDonald's vs Yum!

By Austin Smith – Nov 21, 2012 at 12:31PM

NYSE: MCD

McDonald's

Market Cap

$199B

Today's Change

(-0.42%) -$1.15

Current Price

$275.60

Price as of April 25, 2024, 4:00 p.m. ET

Which fast foot giant is the better place for new money?

McDonald's (MCD -0.42%) has been a dud in 2012, while Yum! Brands (YUM -0.18%) has continued to outperform, but with that run has come a premium multiple.

So which stock is a better buy today: the cheaper, underperforming McDonald's or the rosier and more expensive Yum! Brands?

Mickey D's has a more sustainable long-term model than just about any company in this space, and has a low price-to-earnings ratio right now. In a world of short-termism, it's easy to forget that the best investment is measured in years, not quarters, and when you take a look at McDonald's long-term trend, investors are getting a bargain, making McDonald's the better buy today.

Austin Smith owns shares of McDonald's. The Motley Fool owns shares of Arcos Dorados, McDonald's, and Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend McDonald's and Starbucks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.