Rating: HOLD
| Metric | Value |
|---|---|
| Current Price | $296 |
| Triangulated Fair Value | $216 |
| 12-mo Scenario PWEV | $289 |
| Implied Return | -27% |
| Forward P/E | 15.4x |
| Market Cap | $10B |
| 52-Week Range | $282 – $487 |
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 $511, +73% vs spot. It needs Gross Margin to surprise to the upside.
The dashboard below is the whole argument on one page: spot ($296) 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 $127, -57% vs spot. This sits below the 52-week low — a genuine structural impairment, not a mild pullback.
Key Debate
Gross Margin explains 48% 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 +0.39 vs analyst floor +0.00 → delta +0.39 (n=36 mgmt / 18 Q&A; 50th pctile across the S&P book, z -0.0).
Flag: TYPICAL — management-vs-analyst tone within the normal cross-sectional range.
| Quarter | Mgmt | Analyst | Delta |
|---|---|---|---|
| 2026Q1 | +0.39 | +0.00 | +0.39 |
| 2025Q4 | +0.52 | +0.20 | +0.32 |
| 2025Q3 | +0.47 | +0.21 | +0.27 |
| 2025Q2 | +0.47 | +0.24 | +0.23 |
News (last 365d, 1000 articles): avg ticker sentiment +0.12 (bullish 15% / bearish 5%)
Scenario Analysis
The tree runs from a structural 'Structural — Traffic Loss / GLP-1 / Saturation' downside ($127) to a 'Bull — Premium Re-Rate' bull case ($511); the probability-weighted blend (PWEV $289) is -2% versus spot.
| Scenario | Probability | Target | Return |
|---|---|---|---|
| Structural — Traffic Loss / GLP-1 / Saturation | 20% | $127 | -57% |
| Consumer-Spending Recession | 17% | $216 | -27% |
| Base — Comps + Unit Growth | 35% | $300 | +1% |
| Growth — Digital / International Units | 20% | $405 | +37% |
| Bull — Premium Re-Rate | 8% | $511 | +73% |
| Probability-Weighted (PWEV) | — | $289 | -2% |
Scenario rationale — what each probability buys (the driver path behind every target):
- Structural — Traffic Loss / GLP-1 / Saturation (20%, $127). 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: 127.18; probability: 0.2.
- Consumer-Spending Recession (17%, $216). Cyclical downturn — restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) weakens for 1–2 years before normalising. Drivers — implied_target: 215.98; probability: 0.17.
- Base — Comps + Unit Growth (35%, $300). Mid-cycle — normalised restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate); disciplined capital allocation; steady returns. Drivers — implied_target: 299.97; probability: 0.35.
- Growth — Digital / International Units (20%, $405). Upside — digital + international unit growth lifts earnings above mid-cycle; the multiple expands modestly. Drivers — implied_target: 404.96; probability: 0.2.
- Bull — Premium Re-Rate (8%, $511). Upside tail — sustained tight conditions or a structural re-rate on digital + international unit growth. Drivers — implied_target: 511.45; 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 | $257 | -13% |
| Peer P/E re-rate | multiple | $491 | +66% |
| Peer EV/Revenue re-rate | multiple | $610 | +106% |
| Scenario PWEV | multiple | $289 | -2% |
| DCF (5-year + terminal) | cash flow + terminal × | $146 | -51% |
| Triangulated (weighted) | — | $216 | -27% |
peer P/E re-rate excluded from the weighted blend — diverges >55% from the Monte-Carlo / scenario core. For a high-leverage equity the per-share DCF (enterprise value less large net debt) is hypersensitive to the terminal multiple; a peer re-rate across heterogeneous margins is apples-to-oranges. Shown above for reference; the blend leans on the multiple-discipline and scenario anchors.
Rating vs blend — the key debate. The rating tracks the multiple-discipline fair value (Monte Carlo $257 + scenario PWEV $289, ≈ spot); the weighted blend $216 (-27%) sits below it because the cash-flow DCF ($146) 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 $257 and 38% of paths finish above spot. The variance decomposition shows the gross margin is the dominant swing factor (48% 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%, 13x terminal FCF multiple → $146. 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 25.485x) implies $491. 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 wide (genuine disagreement — low valuation confidence).
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) | $5.0B | 100% | 5% | 16% | 15x | 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 | -4.9 |
Capital intensity & shareholder returns (ESTIMATE)
| Dimension | Assessment |
|---|---|
| capex_pct_revenue | 0.05 |
| div_yield | 0.0251 |
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 | $5B | $1B | $0B | $0B | $1B | $1B |
| FY+2 | $5B | $1B | $0B | $0B | $1B | $1B |
| FY+3 | $6B | $1B | $0B | $0B | $1B | $1B |
| FY+4 | $6B | $1B | $0B | $0B | $1B | $1B |
| FY+5 | $6B | $1B | $0B | $0B | $1B | $1B |
| Terminal | — | — | — | — | $1B × 13x | $7B |
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) $3B + PV(terminal) $7B = EV $10B; + net cash → equity $5B ÷ diluted shares 0.03B = $146/share (exit-multiple terminal).
- Gordon (perpetuity-growth) terminal at 2.5% → $236/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% |
| CMG | 3.709x | 27.55x | 5% | 13% |
| Median | 5.0045x | 25.485x | — | — |
Peer-median fwd P/E → $491; EV/Rev → $610.
Weighted fair-value math
| Anchor | Value | Weight | Contribution |
|---|---|---|---|
| DCF | $146 | 47% | $68 |
| Scenario PWEV | $289 | 33% | $96 |
| Monte Carlo median | $257 | 20% | $51 |
| Triangulated | — | 100% | $216 |
Sensitivity
DCF/share — WACC × terminal multiple
| WACC ＼ Term× | 9.1x | 11.0x | 13.0x | 14.9x | 16.9x |
|---|---|---|---|---|---|
| 6% | $103 | $136 | $171 | $205 | $240 |
| 7% | $93 | $125 | $158 | $190 | $224 |
| 8% | $84 | $114 | $146 | $176 | $208 |
| 9% | $75 | $104 | $134 | $163 | $194 |
| 10% | $66 | $94 | $123 | $151 | $180 |
DCF/share — revenue CAGR Δ × op-margin Δ
| CAGRΔ ＼ MgnΔ | -3.0pp | -1.5pp | +0.0pp | +1.5pp | +3.0pp |
|---|---|---|---|---|---|
| -3.0pp | $69 | $93 | $116 | $140 | $164 |
| -1.5pp | $80 | $106 | $131 | $156 | $181 |
| +0.0pp | $92 | $119 | $146 | $173 | $200 |
| +1.5pp | $105 | $133 | $162 | $191 | $219 |
| +3.0pp | $118 | $148 | $179 | $209 | $240 |
Tornado — DCF/share swing by driver (widest first)
| Driver | Low | High | Swing |
|---|---|---|---|
| Op margin ±3pp | $92 | $200 | $107 |
| Terminal × ±15% | $115 | $177 | $62 |
| Revenue CAGR ±3pp | $116 | $179 | $62 |
| WACC ±1pp | $134 | $158 | $24 |
| FCF conversion ±10% | $146 | $146 | $0 |
Company lever — SoP/share vs Restaurants (franchised / company) multiple (AI re-rating) (base 15x)
| Multiple | 10.5x | 12.8x | 15.0x | 17.2x | 19.5x |
|---|---|---|---|---|---|
| SoP/share | $1,442 | $1,791 | $2,124 | $2,458 | $2,806 |
Load-Bearing Assumptions
DCF: WACC 8%, terminal multiple 13×, FY+5 revenue $6B. 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 $127.
Fact / Inference / Speculation
- FACT: Spot $296; 52-week range $282–$487; engine rating HOLD; base-case target $289 (-2%).
- INFERENCE: Triangulated FV $216 (-27%). Gross Margin explains 48% 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 48% of outcome variance.
Recommendation: HOLD
Balanced: triangulated fair value $248 (-16% vs spot); the outcome hinges on Gross Margin. The debate is Gross Margin (48% of variance) — a fundamental call. SBC runs —M TTM (disclosed in the appendix).