McDonald's Corporation (MCD): A Bull Case Theory

We came across a bullish thesis on McDonald’s Corporation on Phaetrix Investing’s Substack by Phaetrix. In this article, we will summarize the bulls’ thesis on MCD. McDonald’s Corporation's share was trading at $315.00 as of January 30th. MCD’s trailing and forward P/E were 25.70 and 22.62 respectively according to Yahoo Finance.

McDonald's Corporation owns, operates, and franchises restaurants under the McDonald's brand in the United States and internationally. MCD operates less as a traditional restaurant chain and more as a global tollbooth, collecting rent, royalties, and fees from its franchisees, which account for roughly 95% of its restaurants worldwide. This model drives highly profitable, recurring corporate streams, with margins far superior to running company-operated stores.

In Q3 2025, franchised revenue of $4.36 billion produced $666 million in occupancy expenses, leaving a wide spread, while company-operated restaurants had a far narrower margin profile, highlighting the durability and efficiency of the franchise business. Beyond rent collection, McDonald’s benefits from its digital ecosystem, including loyalty programs and app ordering, which in the trailing twelve months generated $34 billion in systemwide sales, helping reinforce repeat customer behavior. Unit expansion remains another engine of growth, with approximately 2,200 new restaurants planned for 2025, broadening the global footprint and compounding cash flow.

The company generates strong free cash flow, with 81% conversion in 2024 and $7.7 billion returned to shareholders through dividends and buybacks, including a 49th consecutive annual dividend increase. Risks include systemwide traffic quality, value perception, franchisee relations, and unit growth execution, but these are largely structural rather than operational weaknesses, and the business is resilient even under moderate pressure.

Valuation discipline is key: at ~$315, MCD trades at mid-to-high 20s P/E, with better entry points below $300 and additional accumulation below $285. Overall, McDonald’s represents a high-quality, defensive compounder that transforms global demand into durable, high-margin streams, offering steady growth, reinvestment, and shareholder returns while requiring careful attention to price.

Previously, we covered a bullish thesis on McDonald’s Corporation (MCD) by David in October 2024, which highlighted the company’s strong free cash flow, disciplined share repurchases, and steady dividend policy as drivers of long-term shareholder value. MCD’s stock price has appreciated by approximately 5.50% since our coverage. David shares an identical thesis but emphasizes the franchise model’s structural durability as the key driver of consistent returns.

McDonald’s Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 83 hedge fund portfolios held MCD at the end of the third quarter which was 78 in the previous quarter. While we acknowledge the potential of MCD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.