Rating: HOLD
| Metric | Value |
|---|---|
| Current Price | $34 |
| Triangulated Fair Value | $28 |
| 12-mo Scenario PWEV | $33 |
| Implied Return | -18% |
| Forward P/E | 29.1x |
| Market Cap | $44B |
| 52-Week Range | $28 – $58 |
Methodology: Valuation triangulated across five independent anchors — Monte Carlo (Student-t + regime switching), an independent DCF, peer re-rating, a sum-of-parts, and a scenario-weighted PWEV. Figures reconciled to Alpha Vantage 2026-06-26. Each chart below sits with the part of the thesis it evidences.
Investment Thesis
The bull case — 'Bull — Premium Re-Rate' (8% weight) — targets $58, +70% vs spot. It needs Gross Margin to surprise to the upside.
The dashboard below is the whole argument on one page: spot ($34) against each valuation anchor, the scenario tree, technicals and the options-implied move.
Anti-Thesis (The Real Bear Case)
The structural case — 'Structural — Traffic Loss / GLP-1 / Saturation' (20%) — targets $14, -58% vs spot. This sits below the 52-week low — a genuine structural impairment, not a mild pullback.
Key Debate
Gross Margin explains 50% of Monte Carlo outcome variance — the single variable that decides which side is right.
Earnings-Call Disconfirmation & Sentiment
Derived signals from the MCH market-data store (Alpha Vantage transcripts + news). Quantitative tone only — a disconfirmation flag, not a substitute for reading the call.
Management vs analyst tone (2026Q1): management +0.62 vs analyst floor +0.00 → delta +0.62 (n=26 mgmt / 18 Q&A; 91th pctile across the S&P book, z +1.4).
Flag: ELEVATED — management unusually upbeat vs the analyst floor relative to peers (disconfirmation watch).
| Quarter | Mgmt | Analyst | Delta |
|---|---|---|---|
| 2026Q1 | +0.62 | +0.00 | +0.62 |
| 2025Q4 | +0.43 | +0.25 | +0.18 |
| 2025Q3 | +0.30 | +0.12 | +0.17 |
| 2025Q2 | +0.48 | +0.25 | +0.23 |
News (last 365d, 1000 articles): avg ticker sentiment +0.18 (bullish 30% / bearish 4%)
Scenario Analysis
The tree runs from a structural 'Structural — Traffic Loss / GLP-1 / Saturation' downside ($14) to a 'Bull — Premium Re-Rate' bull case ($58); the probability-weighted blend (PWEV $33) is -4% versus spot.
| Scenario | Probability | Target | Return |
|---|---|---|---|
| Structural — Traffic Loss / GLP-1 / Saturation | 20% | $14 | -58% |
| Consumer-Spending Recession | 17% | $24 | -28% |
| Base — Comps + Unit Growth | 35% | $34 | +0% |
| Growth — Digital / International Units | 20% | $46 | +35% |
| Bull — Premium Re-Rate | 8% | $58 | +70% |
| Probability-Weighted (PWEV) | — | $33 | -4% |
Scenario rationale — what each probability buys (the driver path behind every target):
- Structural — Traffic Loss / GLP-1 / Saturation (20%, $14). Structural impairment — traffic loss / GLP-1 / saturation: earnings AND the multiple compress together. Target sits below the 52-week low by construction. Drivers — implied_target: 14.41; probability: 0.2.
- Consumer-Spending Recession (17%, $24). Cyclical downturn — restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) weakens for 1–2 years before normalising. Drivers — implied_target: 24.48; probability: 0.17.
- Base — Comps + Unit Growth (35%, $34). Mid-cycle — normalised restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate); disciplined capital allocation; steady returns. Drivers — implied_target: 34.0; probability: 0.35.
- Growth — Digital / International Units (20%, $46). Upside — digital + international unit growth lifts earnings above mid-cycle; the multiple expands modestly. Drivers — implied_target: 45.9; probability: 0.2.
- Bull — Premium Re-Rate (8%, $58). Upside tail — sustained tight conditions or a structural re-rate on digital + international unit growth. Drivers — implied_target: 57.97; probability: 0.08.
Valuation Triangulation
Five anchors — but read them with their basis in mind. The Monte Carlo, the DCF terminal, and the peer re-rate all key off a market multiple, so they are not fully independent; only the discounted cash flows themselves are genuinely multiple-free. The discipline is to read the spread and weight the cash-based view, not to treat five numbers as five independent votes.
| Method | Basis | Fair Value | vs Spot |
|---|---|---|---|
| Monte Carlo median (Student-t + regime) | multiple | $29 | -14% |
| Peer P/E re-rate | multiple | $26 | -23% |
| Peer EV/Revenue re-rate | multiple | $43 | +26% |
| Scenario PWEV | multiple | $33 | -4% |
| DCF (5-year + terminal) | cash flow + terminal × | $25 | -27% |
| Triangulated (weighted) | — | $28 | -18% |
Rating vs blend — the key debate. The rating tracks the multiple-discipline fair value (Monte Carlo $29 + scenario PWEV $33, ≈ spot); the weighted blend $28 (-18%) sits below it because the cash-flow DCF ($25) is materially more conservative than the market multiple. Whether the current multiple is justified is the central question for this name — and the principal downside risk to the rating.
Monte Carlo — the distribution, not a point
10,000 paths, Student-t shocks (fat tails) with a regime-switching overlay. The median lands at $29 and 37% of paths finish above spot. The variance decomposition shows the gross margin is the dominant swing factor (50% of variance). The fundamental driver, not the multiple, sets the spread — a cleaner setup.
DCF — the cash-flow anchor
Independent of the market multiple: a 5-year path, WACC 8.0%, 24x terminal FCF multiple → $25. This anchor is deliberately the heaviest (41%): it is the valuation least hostage to the current multiple regime.
Peer benchmarking — relative value
Against the peer cohort, re-rating to the peer-median forward multiple (P/E 22.26x) implies $26. A premium is only justified by superior growth/margins; otherwise it is multiple risk. Weighted just 12% so the market's mood does not drive the fair value.
Across all anchors the spread is tight (the methods corroborate one another).
Revenue-Segment Breakdown
The company-specific drivers behind the valuation — each segment carries its own growth, margin, multiple and capex intensity. (Tags: FACT reported · ESTIMATE from disclosures · INFERENCE judgment.)
| Segment | Revenue | Mix | Growth | Op margin | Multiple | Capex % | Tag |
|---|---|---|---|---|---|---|---|
| Restaurants (franchised / company) | $12.1B | 100% | 5% | 15% | 28x | 5% | ESTIMATE |
Named Exposures
Demand & pricing cycle (FACT/ESTIMATE)
| Dimension | Assessment |
|---|---|
| driver | restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) |
| net_debt_or_cash_b | -5.0 |
Capital intensity & shareholder returns (ESTIMATE)
| Dimension | Assessment |
|---|---|
| capex_pct_revenue | 0.05 |
| div_yield | None |
Structural risk vs optionality (INFERENCE)
| Dimension | Assessment |
|---|---|
| downside | traffic loss / GLP-1 / saturation |
| upside | digital + international unit growth |
Industry Context — Consumer Discretionary — Restaurants
This name sits in the Consumer Discretionary — Restaurants as a restaurants. restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) Its scenarios are not guessed in isolation — they inherit a single, shared view of the cluster's driver cycle, so the names that depend on the same event are mutually consistent.
Value chain: MCD (restaurants) · SBUX (restaurants) · YUM (restaurants) · CMG (restaurants) · DRI (restaurants) · DPZ (restaurants)
| Shared state | Capex path | House view | This name implies |
|---|---|---|---|
| Traffic Recession — GLP-1 / Consumer Pullback | 37% | 37% | |
| Mid-Cycle — Comps + Unit Growth | 35% | 35% | |
| Upside — Digital / International Units | 28% | 28% |
On the cluster's key downside — Traffic Recession — GLP-1 / Consumer Pullback () — this name implies 37% vs the cluster house view of 37% (in line with the house). The cluster's full cross-stock reconciliation governs that the names which ride the same capex cycle assign it comparable odds.
Structure: Shared State — The disc_restaurants cycle is the shared macro driver. Driver — restaurant traffic + comps + unit growth vs labor/commodity costs Dispersion — Members differ by cyclicality (quality compounders vs deep cyclicals).
Model Appendix
DCF — line items
| Year | Revenue | Op income | − Capex | + D&A | FCF | PV(FCF) |
|---|---|---|---|---|---|---|
| FY+1 | $13B | $2B | $1B | $1B | $2B | $1B |
| FY+2 | $13B | $2B | $1B | $1B | $2B | $1B |
| FY+3 | $14B | $2B | $1B | $1B | $2B | $1B |
| FY+4 | $14B | $2B | $1B | $1B | $2B | $1B |
| FY+5 | $15B | $2B | $1B | $1B | $2B | $1B |
| Terminal | — | — | — | — | $2B × 24x | $30B |
FCF is bridged: NOPAT + D&A − Capex − ΔNWC (capex intensity 5% of revenue, weighted from the segments) — not a single conversion fudge.
WACC 8.0% · Σ PV(FCF) $7B + PV(terminal) $30B = EV $37B; + net cash → equity $32B ÷ diluted shares 1.28B = $25/share (exit-multiple terminal).
- Gordon (perpetuity-growth) terminal at 2.5% → $19/share — a genuinely non-multiple, cash-based cross-check; the exit-multiple and Gordon values bracket the terminal-value risk.
- Incremental ROIC on the forecast capex ≈ 10% vs WACC 8% → above WACC — the build is value-creative.
Peer set
| Peer | EV/Rev | Fwd P/E | Growth | Op margin |
|---|---|---|---|---|
| MCD | 9.05x | 21.1x | 5% | 44% |
| SBUX | 3.646x | 35.09x | 5% | 8% |
| YUM | 6.3x | 23.42x | 5% | 31% |
| DRI | 2.381x | 18.55x | 5% | 13% |
| Median | 4.973x | 22.26x | — | — |
Peer-median fwd P/E → $26; EV/Rev → $43.
Weighted fair-value math
| Anchor | Value | Weight | Contribution |
|---|---|---|---|
| DCF | $25 | 41% | $10 |
| Scenario PWEV | $33 | 29% | $10 |
| Monte Carlo median | $29 | 18% | $5 |
| Peer P/E | $26 | 12% | $3 |
| Triangulated | — | 100% | $28 |
Sensitivity
DCF/share — WACC × terminal multiple
| WACC ＼ Term× | 16.8x | 20.4x | 24.0x | 27.6x | 31.2x |
|---|---|---|---|---|---|
| 6% | $20 | $23 | $27 | $31 | $35 |
| 7% | $19 | $22 | $26 | $30 | $33 |
| 8% | $18 | $21 | $25 | $28 | $32 |
| 9% | $17 | $20 | $24 | $27 | $30 |
| 10% | $16 | $19 | $22 | $26 | $29 |
DCF/share — revenue CAGR Δ × op-margin Δ
| CAGRΔ ＼ MgnΔ | -3.0pp | -1.5pp | +0.0pp | +1.5pp | +3.0pp |
|---|---|---|---|---|---|
| -3.0pp | $17 | $19 | $22 | $24 | $26 |
| -1.5pp | $18 | $21 | $23 | $26 | $28 |
| +0.0pp | $19 | $22 | $25 | $27 | $30 |
| +1.5pp | $21 | $23 | $26 | $29 | $32 |
| +3.0pp | $22 | $25 | $28 | $31 | $34 |
Tornado — DCF/share swing by driver (widest first)
| Driver | Low | High | Swing |
|---|---|---|---|
| Op margin ±3pp | $19 | $30 | $11 |
| Terminal × ±15% | $21 | $28 | $7 |
| Revenue CAGR ±3pp | $22 | $28 | $6 |
| WACC ±1pp | $24 | $26 | $2 |
| FCF conversion ±10% | $25 | $25 | $0 |
Company lever — SoP/share vs Restaurants (franchised / company) multiple (AI re-rating) (base 28x)
| Multiple | 19.6x | 23.8x | 28.0x | 32.2x | 36.4x |
|---|---|---|---|---|---|
| SoP/share | $181 | $221 | $260 | $300 | $339 |
Load-Bearing Assumptions
DCF: WACC 8%, terminal multiple 24×, FY+5 revenue $15B. Triangulation leans 41% on DCF, 29% on PWEV.
Reasons the Thesis Could Fail (Falsifiable)
A miss on Gross Margin drops the case toward the structural target $14.
Fact / Inference / Speculation
- FACT: Spot $34; 52-week range $28–$58; engine rating HOLD; base-case target $33 (-4%).
- INFERENCE: Triangulated FV $28 (-18%). Gross Margin explains 50% of Monte Carlo outcome variance — the single variable that decides which side is right.
- SPECULATION: At current prices the embedded bet is that Gross Margin surprises to the upside — Gross Margin carries 50% of outcome variance.
Recommendation: HOLD
Balanced: triangulated fair value $28 (-18% vs spot); the outcome hinges on Gross Margin. The debate is Gross Margin (50% of variance) — a fundamental call. SBC runs —M TTM (disclosed in the appendix).