McDonald’s Corporation (MCD) and Chipotle Mexican Grill (CMG) Critical Survey

McDonald’s Corporation (NYSE: MCD) and Chipotle Mexican Grill (NYSE:CMG) are both mid-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, valuation, profitability, analyst recommendations, earnings, institutional ownership and dividends.

Profitability

This table compares McDonald’s Corporation and Chipotle Mexican Grill’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
McDonald’s Corporation 21.00% -264.89% 16.21%
Chipotle Mexican Grill 3.17% 10.65% 7.38%

Valuation & Earnings

This table compares McDonald’s Corporation and Chipotle Mexican Grill’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
McDonald’s Corporation $24.18 billion 5.35 $9.60 billion $6.11 26.14
Chipotle Mexican Grill $4.31 billion 1.98 $397.78 million $4.74 63.30

McDonald’s Corporation has higher revenue and earnings than Chipotle Mexican Grill. McDonald’s Corporation is trading at a lower price-to-earnings ratio than Chipotle Mexican Grill, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

68.0% of McDonald’s Corporation shares are held by institutional investors. Comparatively, 90.3% of Chipotle Mexican Grill shares are held by institutional investors. 0.2% of McDonald’s Corporation shares are held by company insiders. Comparatively, 2.0% of Chipotle Mexican Grill shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings and recommmendations for McDonald’s Corporation and Chipotle Mexican Grill, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McDonald’s Corporation 0 9 22 0 2.71
Chipotle Mexican Grill 4 21 10 0 2.17

McDonald’s Corporation currently has a consensus price target of $162.05, suggesting a potential upside of 1.46%. Chipotle Mexican Grill has a consensus price target of $399.84, suggesting a potential upside of 33.27%. Given Chipotle Mexican Grill’s higher probable upside, analysts clearly believe Chipotle Mexican Grill is more favorable than McDonald’s Corporation.

Dividends

McDonald’s Corporation pays an annual dividend of $3.76 per share and has a dividend yield of 2.4%. Chipotle Mexican Grill does not pay a dividend. McDonald’s Corporation pays out 61.5% of its earnings in the form of a dividend. McDonald’s Corporation has increased its dividend for 40 consecutive years.

Risk & Volatility

McDonald’s Corporation has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500. Comparatively, Chipotle Mexican Grill has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500.

Summary

McDonald’s Corporation beats Chipotle Mexican Grill on 11 of the 17 factors compared between the two stocks.

McDonald’s Corporation Company Profile

McDonald’s Corporation (McDonald’s) operates and franchises McDonald’s restaurants. The Company’s restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company’s segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate. The U.S. segment focuses on offering a platform for authentic ingredients that allows customers to customize their sandwiches. Its High Growth Markets segment includes its operations in markets, such as China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands and related markets. The International Lead markets segment includes the Company’s operations in various markets, such as Australia, Canada, France, Germany, the United Kingdom and related markets. The Foundational markets and Corporate segment is engaged in operating restaurants and increasing convenience to customers, including through drive-thru and delivery.

Chipotle Mexican Grill Company Profile

Chipotle Mexican Grill, Inc. (Chipotle), together with its subsidiaries, operates Chipotle Mexican Grill restaurants. The Company’s Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2016, the Company managed its operations and restaurants based on 11 regions. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and it also had 23 restaurants in operation in other non-Chipotle concepts. As of December 31, 2016, 29 of its restaurants were located outside of the United States, with 17 in Canada, six in the United Kingdom, five in France and one in Frankfurt, Germany. The Company sells gift cards, which do not have an expiration date. The Company categorizes its restaurants as end-caps (at the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing or other.

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