McDonald's: Still A Buy For Long-Term Investors

| About: McDonald's Corporation (MCD)

Late last week McDonald's (NYSE:MCD) reported global same-store sales were up 7.4%. Both the United States and Europe's sales were up 6.5% despite both region's economic woes. The growth in same-store sales (open 13 months or more) were far and away above the estimated 4.9% analysts had predicted.

McDonald's continues to fire on all cylinders across the globe. The company's McRib promotion and seasonal McCafe drinks helped boost results.

I first wrote positively about McDonald's (McDonald's: A Sell, Or On Sale?) in January of this year. At that time the stock traded at $74.21. Investors buying shares at that level would be up a handsome 32%. The stock, though not nearly as cheap, is still a good buy for the long-term investor.

McDonald's has a Price/Earnings ratio of 19 and a forward P/E of 17. The stock trades at about 4 times sales. It has a Enterprise Value to EBITDA ratio of 11.54.

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McDonald's stock isn't cheap. However, when compared to competitors the valuations seem more attractive.

Despite McDonald's continuing success, its European exposure remains a concern for many investors. The company gets 40% of its revenue from Europe. That's more than the 31% that comes from the United States. McDonald's has shown that it can outperform in a recessionary environment. McDonald's may even be able to benefit from all but a worst-case scenario in Europe as consumers tend to trade down in a poor economy. McDonald's presents a compelling value proposition for consumers. While the company continues to offer low-priced menu items, they have successfully increased prices an average of 3% this year. The company's premium coffee and specialty drink selection offers consumers a price point below Starbucks (NASDAQ:SBUX), yet they are high-margin items for the company.

McDonald's is undertaking the biggest store makeover in its history. In the end, virtually all of the company's U.S. and European stores will have a new look. Walk into a newly renovated McDonald's and it's likely to look more like a Panera Bread (NASDAQ:PNRA) store than your old McDonald's.

Long-term investors should consider the company's attractive dividend - the stock yields 2.86% - and history of dividend increases. McDonald's has raised its dividend at an annualized rate of 27.5% over the last five years.

Currently, Asia makes up about 22% of revenue. Growth in this region will continue over the next several years. Comparatively, Yum Brands (NYSE:YUM) garners half of its revenue from China alone. There is a huge runway for growth still left for McDonald's in Asia. Growth in Asia should help propel the company forward for years to come.

As well, McDonald's may propel long-term investor's portfolios for years to come.

Disclosure: I am long MCD, YUM.