McDonald's Corporation (NYSE:MCD) is facing a lot of headwinds and negative factors. Despite all of this, they are not just going to disappear in the face of the earth easily.
Their current P/E levels at 16.93 makes it an even better investment.
Obviously, the company would probably suffer a couple of years because of issues like the tainted meat in China and the image of being a junk food.
The portion of the story that isn't often highlighted in the news however is their low priced meals that appeals to those who are trying to save a few dollars when the economy is bad.
Right now, the overall economy isn't getting any better, hence, their sales are actually improving because of this counter cyclical reason.
There are simply more people trying to get by with less money than those that can afford to splurge on their meals because of the health factors.
For the sake of being overly conservative, let's assume all negative things that can happen to MCD within reasonable limits.
- never getting back the health conscious segment of the market
- competitors will continue to chip away at their sales
- will forever have the image of a junk food outlet
Factors countering the elements against MCD
- poor and middle class will always find MCD convenient especially in terms of price
- sheer size of geographical coverage worldwide
- strategic locations of its physical stores
- on a worldwide basis, its net income didn't show much change since 2010, in fact, it actually increased a little
Enter the next Foray into a whole new universe....
...the purported next big thing. Fresh and healthy ingredient on the high end side.
Priced a little higher than fast food but lower than a sit down restaurant.
Yum brands right now is trying their hands on Vietnamese sandwiches called "Banh Mi" which is a Vietnamese sandwich.
Of course, its still a long way to tell whether this will change the landscape. The point is that real dangers are in the horizon and MCD investors can either chose to stay or start keeping an eye on these developments and then decide whether the situation warrants enough impact to jump ship or not.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.