Key Takeaways
- • Former hedge fund manager Whitney Tilson, in a newsletter, called McDonald's (MCD) "moderately undervalued" after the stock fell another 14% since his June assessment, when he had judged it fairly valued.
- • McDonald's trades at 17.6 times consensus next-year earnings estimates, slightly below its 19.7 times historical average price-to-earnings over the past quarter century, according to Tilson.
- • Global comparable sales growth has decelerated, from 5.7% in Q4 2025 to 3.8% in Q1 2026 and 1.3% in Q2 2026, with the stock trading near four-year lows.
- • Tilson cites franchising-driven margin gains, free cash flow that has doubled since 2018, and a dividend yield above 3% supported by share buybacks.
- • The stock peaked at $341.75 in March 2026 and recently traded near $232 to $236, per market data.
Summary
McDonald's Corp (NYSE: MCD) shares have fallen to four-year lows, prompting former hedge fund manager Whitney Tilson to reassess the stock and conclude that it is "moderately undervalued." In a newsletter cited by TradingView, Tilson wrote that with the stock down another 14% since June, "might it now be an especially good buying opportunity?" He had judged the shares fairly valued at that earlier point and said his view has changed.
Tilson pointed to structural strengths in the business. He argued that revenues have barely grown over two decades largely because McDonald's has franchised many company-owned units, which reduces capital intensity and lifts profits. He also highlighted free cash flow doubling since 2018 and shareholder returns through buybacks and a dividend yielding more than 3%. He described McDonald's as a "slow-growing cash cow" with high margins and robust free cash flow.
The slowdown in growth is the main concern. Tilson cited global comparable sales growth of 5.7% in the fourth quarter of 2025, 3.8% in the first quarter of 2026, and 1.3% in the second quarter of 2026. Tilson acknowledged competitive pressure on restaurant stocks from weight-loss drugs but said the valuation discount outweighs that risk. McDonald's trades at 17.6 times consensus estimates for next year's earnings, below its 19.7 times average over the past 25 years.
Tilson has a long history with the stock. He bought shares in late 2002 and added more in early 2003 when they traded below $13, at one point making the position roughly 10% of his fund. He recalled the shares roughly doubling within two years and reaching the mid-$60s within five years. He sold during the 2008 bear market, which he called a mistake, noting that McDonald's was one of only two Dow Industrials stocks to finish 2008 positive, alongside Walmart. The stock reached $200 by 2019 and $300 by 2024, peaking at $341.75 in March 2026. Market data cited by the publisher showed MCD around $235.88 as of October 11, 2026.
Tilson pointed to structural strengths in the business. He argued that revenues have barely grown over two decades largely because McDonald's has franchised many company-owned units, which reduces capital intensity and lifts profits. He also highlighted free cash flow doubling since 2018 and shareholder returns through buybacks and a dividend yielding more than 3%. He described McDonald's as a "slow-growing cash cow" with high margins and robust free cash flow.
The slowdown in growth is the main concern. Tilson cited global comparable sales growth of 5.7% in the fourth quarter of 2025, 3.8% in the first quarter of 2026, and 1.3% in the second quarter of 2026. Tilson acknowledged competitive pressure on restaurant stocks from weight-loss drugs but said the valuation discount outweighs that risk. McDonald's trades at 17.6 times consensus estimates for next year's earnings, below its 19.7 times average over the past 25 years.
Tilson has a long history with the stock. He bought shares in late 2002 and added more in early 2003 when they traded below $13, at one point making the position roughly 10% of his fund. He recalled the shares roughly doubling within two years and reaching the mid-$60s within five years. He sold during the 2008 bear market, which he called a mistake, noting that McDonald's was one of only two Dow Industrials stocks to finish 2008 positive, alongside Walmart. The stock reached $200 by 2019 and $300 by 2024, peaking at $341.75 in March 2026. Market data cited by the publisher showed MCD around $235.88 as of October 11, 2026.
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