McDonaldandPepsiCoThey are all giant restaurants, beverages, and food companies in the US. The US has been ravaged by the epidemic in the past six months, and the business of both companies has inevitably been affected.
Take Pepsi as an example. Although beneficiary consumers stay at home and consume more products from its snack brand Lays, the relevant sales channels are hampering the food business due to the suspension of dine-in services at many restaurants. As for McDonald's, dine-in has been banned, but there are still efficient takeout and drive-thru (drive-thru) services that can be maintained.
If the COVID-19 vaccine proves effective in the foreseeable future, so that economic activity can be normalized, these two stocks will definitely benefit, but who is more worth buying?
Is McDonald's more profitable?
Today's McDonald's has become weakerassetsThe route, which operates on a franchise basis, greatly reduces capital and cost investment. Currently, the group has about 39,000 branches, of which 93% are franchise stores. The group's revenue comes from sales sharing and franchise fees, and the related model is more profitable.
Furthermore, in recent years, the company has greatly increased its investment in technology. In particular, it has strengthened automated sales and operation systems, including self-service purchasing systems and intelligent self-pick-up systems for driving, which not only reduce costs, but also improve efficiency. The market estimates that 70% of the business under the pandemic comes from self-pick-up by driving.
In the third quarter of this year, McDonald's revenue and earnings per share both surpassed market expectations. As can be seen from the table above, McDonald's profitability was higher, and its profit level was higher than Pepsi. Even with revenue falling in the third quarter, McDonald's profit increased by nearly 10%, which is still slightly higher than Pepsi. According to data, over the past 10 years, McDonald's profit level surpassed Pepsi's average.
As for the profit prospects of the two companies? The market expects McDonald's profit from 19 to 22 to grow at a compound annual rate of 3%, while Pepsi's profit was slightly higher than 6%. I believe the relevant forecast is influenced by the pandemic. If daily activities around the world are normalized, McDonald's restaurant consumption will rebound sharply, and profit growth should exceed market expectations.
Is McDonald's overvalued?
Trying to compare the predicted price-earnings ratio and market-sales ratio of the two companies, McDonald's reached 25.8 times and 8.4 times, respectively, while PepsiCo was 23.6 times and 2.9 times. Clearly, McDonald's enjoys in terms of valuationpremiumIn particular, the market sales rate was more than twice as high. The question is, is McDonald's worth the high premium?
Based on the above, the profit level of McDonald's over the past 10 years was higher than Pepsi, and even in the third quarter under the impact of the epidemic, the group's profit level was still higher. In addition, McDonald's business model makes the company invest less in capital and generate more profits compared to Pepsi factories, etc., so McDonald's is eligible to enjoy a higher premium.
Investment Conclusion
Finally, McDonald's stock price rebounded 44% from a March low, while Pepsi's stock price only rebounded 27% from a low level. The main reason was that the market was more optimistic about the former's profit vision and the expectation that the vaccine would bring a major reversal to the restaurant industry, causing capital to flow into the stock. Therefore, the most important investment is still to return to basics, that is, the level of profit, especially pureinterest rateIt directly affects the ability to pay dividends and buy back shares. The two companies mentioned above are viewed by McDonald's in the first place.