According to the National Restaurant Association 2024 State of the Restaurant Industry Report, restaurant sales are forecast to exceed $1.10 trillion this year, marking a new milestone for the industry that will employ over 15.7 million people in the United States by the end of 2024.
Additionally, 52% of consumers, including 67% of millennials and 63% of Gen Z adults, believe ordering takeout from a restaurant is an essential part of their lifestyle, further showing the profound impact restaurants have on consumers’ lives. Further, the worldwide fast-food industry is expected to grow due to increasing consumer purchasing power, swift globalization, industrialization, and urbanization.
Against this backdrop, let’s compare two Restaurants stocks, McDonald's Corporation (MCD) and Domino's Pizza Group plc (DPUKY), to analyze which fast-food stock is tastier for investors.
The Case for McDonald's Corporation stock
Valued at $181.22 billion by market cap, McDonald's Corporation (MCD) operates and franchises restaurants under the McDonald’s brand internationally. The company offers food and beverages, like hamburgers, fries, sundaes, soft drinks, coffee, other beverages, and a full or limited breakfast. It owns and operates through conventional franchises, developmental licenses, or affiliate structures.
MCD’s stock has declined 14% over the past year to close the last trading session at $251.46.
In terms of forward EV/Sales, MCD is trading at 9.25x, 686.5% higher than the industry average of 1.18x. Likewise, its forward EV/EBIT is trading at 19.85x, 46.9% higher than the 13.52x industry average. Also, its forward Price/Sales is trading at 7.42x, 772.1% higher than the 0.85x industry average.
In terms of the trailing-12-month net income margin, MCD’s 33.36% is 585.1% higher than the 4.87% industry average. Likewise, its 53.60% trailing-12-month EBITDA margin is 372.4% higher than the industry average of 11.35%. However, its 0.49x trailing-12-month asset turnover ratio is 50.9% lower than the industry average of 0.99x.
MCD’s revenues for the first quarter that ended March 31, 2024, increased 4.6% year-over-year to $6.17 billion. Its operating income rose 8.1% from the year-ago value to $2.74 billion. The company’s non-GAAP net income and non-GAAP EPS came in at $1.96 billion and $2.70, up 1.1% and 2.7% from the prior year’s quarter, respectively.
Street expects MCD’s revenue for the quarter ended June 30, 2024, to increase 2% year-over-year to $6.63 billion. The company’s EPS for the same quarter is expected to decline 3.2% year-over-year to $3.07. Moreover, the company surpassed consensus revenue and EPS estimates in three of the trailing four quarters.
MCD’s POWR Ratings reflect its neutral outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a C grade for Momentum and Sentiment. Within the Restaurants industry, it is ranked #15 out of 41 stocks. To see the additional grades of MCD for Value, Growth, Stability, and Quality, click here.
The Case for Domino's Pizza Group plc stock
Valued at $1.62 billion by market cap, Domino's Pizza Group plc (DPUKY) owns, operates, and franchises Domino's Pizza stores. It operates stores in the United Kingdom and the Republic of Ireland, as well as leases its stores. The company is based in Milton Keynes, the United Kingdom.
DPUKY’s stock has declined marginally over the past month to close the last trading session at $8.04.
In terms of the trailing-12-month asset turnover ratio, DPUKY’s 1.32x is 32.3% higher than the 0.99x industry average. Likewise, its 46.51% trailing-12-month gross profit margin is 26.7% higher than the 36.72% industry average.
DPUKY’s revenue for the year that ended December 31, 2023, rose 13.2% year-over-year to €679.80 billion ($737.32 billion). Its gross profit increased 15.6% year-over-year to €316.20 million ($342.95 billion). Likewise, the company’s profit for the period grew 40.9% year-over-year to €115 million ($124.73 billion). Also, its earnings per share increased 49.2% year-over-year to 27.90 pence.
Street expects DPUKY’s revenue for the year ending December 2024 to increase 6.3% year-over-year to $924.86 million.
DPUKY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
DPUKY has an A grade for Stability. It is ranked #3 in the same industry.
Click here for the additional POWR Ratings for DPUKY (Value, Growth, Sentiment, Quality, and Momentum).
McDonald's (MCD) vs. Domino's Pizza (DPUKY): Which Fast-Food Stock Is Tastier for Investors?
The rapid pace of life, evolving work environments, and shifting eating habits and preferences of the new generation are other factors contributing to the growth of the restaurant market.
Furthermore, the majority of millennials are increasingly inclined toward fast food consumption. Both MCD and DPUKY stand to capitalize on these burgeoning industry trends. However, DPUKY’s higher profitability and strong analysts' sentiments favor it as the better restaurant stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Restaurants industry here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MCD shares were trading at $251.24 per share on Friday afternoon, down $0.22 (-0.09%). Year-to-date, MCD has declined -14.23%, versus a 15.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
McDonald's (MCD) vs. Domino's Pizza (DPUKY): Which Fast-Food Stock Is Tastier for Investors? StockNews.com
