When McDonald's (NYSE:MCD) reported that net income increased 42% in the latest quarter, it was too bad that the late CEO Jim Cantalupo was not there to bask in the limelight. When he took over in January 2003, the company needed a turnaround. He slowed restaurant growth, focused on food service and quality, and made "I'm Lovin' It" more than just a slogan.

With a new strategy, called Plan to Win, the company changed its focus from being bigger to being better. Customers noticed. Although fast-food sales have been strong this year for competitors such as Wendy's (NYSE:WEN), CKE Restaurants (NYSE:CKR), and Sonic (NASDAQ:SONC), it is McDonald's reporting the supersized global same-store sales growth of 7.6% so far this year. That's impressive.

Those looking through the earnings report will see news of weak sales in Germany and the start of efforts to revitalize the brand in the U.K. So not everything is A-OK. On balance, though, McDonald's is a turnaround story that is looking to become "our customers' favorite place and way to eat."

Don't ignore current CEO Charlie Bell. He was smart to leave the strategy alone and build on its success -- and let the free cash flow grow. That cash flow will allow the company to use $1.3 billion to buy back stock and pay dividends in 2004.

McDonald's stock sells at an earnings premium to its peers. With better operating margins than pizza, taco, and chicken purveyor Yum! Brands (NYSE:YUM) and with revenue growth on par with Sonic, Mickey D's deserves recognition. And, with an estimated 2005 earnings multiple of 15, the stock is value (meal) priced.

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Fool contributor W.D. Crotty owns stock in McDonald's and Yum! Brands.