McDonald’s (MCD) – A Case Study in Company Risk

In 1990, McDonald’s was a “safe” company. Today it is very risky:

From 1985 to 1990, its revenues had increased by 80%. However, since 2013 they have decreased by -24%!
In 1990, its debts were about equal to its revenues, but today debts are 92% greater than revenues.
In 1990, its Price to Sales ratio was 1.58, well within reason. McDonald’s current Price to Sales ratio, however, is an excessive 6.67.

Date Revenues Liabilities Market Cap Dividends (TTM) Net Income Interest Expense (TTM) Shares Outstanding PE Ratio
12/31/1990 $6,640 $6,485 $10,459 $133 $802 $0 1,436.4 13.0
12/31/1995 $9,795 $6,889 $31,421 $227 $1,427 $0 1,399.4 22.0
12/31/2000 $14,243 $12,479 $44,584 $0 $1,977 $0 1,304.9 22.5
12/31/2005 $19,117 $14,843 $42,439 $0 $2,602 $0 1,263.2 16.3
12/31/2010 $24,075 $17,341 $80,874 $2,408 $4,946 $431 1,053.6 16.4
12/31/2015 $25,413 $30,851 $107,129 $3,230 $4,529 $629 906.8 23.7
12/21/2018 $21,202 $40,846 $135,256 $3,165 $5,208 $957 770.9 26.0
Date Debt to Revenue Price to Sales Interest Exp. as % of Net Income Interest Exp. as % of Revenue Dividends as % of Net Income Dividends as % of Revenue Dividends + Interest Exp. as % of Net Income Dividends + Interest Exp. as % of Revenue Net Income as % of Revenue
12/31/1990 97.7% 1.58 0.0% 0.0% 16.6% 2.0% 16.6% 2.0% 12.1%
12/31/1995 70.3% 3.21 0.0% 0.0% 15.9% 2.3% 15.9% 2.3% 14.6%
12/31/2000 87.6% 3.13 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 13.9%
12/31/2005 77.6% 2.22 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 13.6%
12/31/2010 72.0% 3.36 8.7% 1.8% 48.7% 10.0% 57.4% 11.8% 20.5%
12/31/2015 121.4% 4.22 13.9% 2.5% 71.3% 12.7% 85.2% 15.2% 17.8%
12/21/2018 192.6% 6.38 18.4% 4.5% 60.8% 14.9% 79.2% 19.4% 24.6%
Date 5Y Revenue Growth
5Y Liabilities Growth
3Y Increase in Liabs as % of Dividends Paid 3Y Increase in Liabs as % of Divs + Buybacks
12/31/1990 79.7% 127.0%
12/31/1995 47.5% 6.2%
12/31/2000 45.4% 81.2%
12/31/2005 34.2% 18.9% 1.66
12/31/2010 25.9% 16.8% 0.50 0.20
12/31/2015 5.6% 77.9% 1.13 0.52
12/21/2018 -24.2% 100.4% 1.74 0.52
By |2018-12-21T21:06:59+00:00December 21st, 2018|Measures of Risk|0 Comments