USA - Invetors have no comprehension of McDonalds

09 Feb 2013

The fact that McDonald's (NYSE: MCD  ) is so big means that its days of growing like a weed are long gone.
That's not surprising. When your market cap is almost $100 billion, it's really tough to move the needle.


It's true that the company isn't likely to book sales growth as high as Chipotle's (NYSE: CMG  ) 8%, or even to match Panera Bread's (NASDAQ: PNRA  ) 6%. But McDonald's size does convey an advantage that's so obvious it tends to get overlooked: The fast-food titan can invest in future growth like no other restaurant can.


This is disappointing?

Take the fiscal year that McDonald's just closed the books on. The company turned in a "disappointing" 2% sales growth. After logging its first monthly comp decline since 2003 in October, McDonald's pulled off a flat fourth quarter. Altogether, global comps increased by 3.1% for the year, bringing sales to $27.5 billion.


That's not great. In fact, it was the lowest annual growth the company has seen in years. And it's nearly half the 5.6% comp boost from 2011.


Still, as a shareholder, I'm not complaining. McDonald's managed to generate $8.6 billion in operating income off that sales figure. Those profits also funded the return of $5.5 billion to shareholders in the form of dividends and stock repurchases. And just as it has for years, the company acted like a compounding machine in 2012. It flipped $0.20 of every revenue dollar into profit, on its way to logging $5.5 billion in net income.


Capital investments

That sizzling financial performance gives Mickey D's a lot of space to fund future growth from current cash flows. We're talking redesigned interiors that boost check averages, and new restaurants that extend the geographic reach of the brand.


For 2013, the company plans to plow a massive $3.2 billion into opening another 1,600 locations worldwide, while modernizing about the same number of existing stores.


Here's a look at how that level of investment stacks up against other companies in the space:




Source: Argentine Beef Packers S.A.

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