Tech, Not Re-Franchising, Might Be the Next Boost for McDonald's
McDonald's (NYSE: MCD) is winding down the re-franchising scheme it launched a few years ago to turn company-owned and -operated locations over to franchisees. The boon this effort created for the stock could be winding down as well. On the heels of a strong showing in Q2 2019, McDonald's stock is up over 90% over the last three years, while earnings per share and free cash flow are up only 44% and 7%, respectively, over the same period.
CEO Steve Easterbrook and his team have done a fantastic job squeezing sales out of the fast-food chain's existing fan base, but guest traffic in the large U.S. market has been in stubborn stagnation for years now. After re-franchising, McDonald's stock looks mighty pricey (currently going for 32.6 times last year's free cash flow). But new technology could be key to realigning valuation with the reality that the times are a-changin', and McDonald's is long-removed from being a high-growth proposition.
McDonald's is near-synonymous with fast food. It didn't invent the drive-thru, but the burger chain helped push the concept into the mainstream starting in the 1970s.
Source Fool.com
