Rating: HOLD
| Metric | Value |
|---|---|
| Current Price | $206 |
| Triangulated Fair Value | $195 |
| 12-mo Scenario PWEV | $218 |
| Implied Return | -5% |
| Forward P/E | 18.0x |
| Market Cap | $24B |
| 52-Week Range | $166 – $219 |
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 $386, +87% vs spot. It needs Gross Margin to surprise to the upside.
The dashboard below is the whole argument on one page: spot ($206) 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 $96, -53% vs spot. This sits below the 52-week low — a genuine structural impairment, not a mild pullback.
Key Debate
Gross Margin explains 58% 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 (2026Q2): management +0.41 vs analyst floor +0.26 → delta +0.15 (n=29 mgmt / 24 Q&A; 6th pctile across the S&P book, z -1.5).
Flag: CANDID — management unusually candid/cautious vs peers (relatively low spin).
| Quarter | Mgmt | Analyst | Delta |
|---|---|---|---|
| 2026Q2 | +0.41 | +0.26 | +0.15 |
| 2026Q1 | +0.34 | +0.21 | +0.13 |
| 2025Q4 | +0.42 | +0.22 | +0.20 |
| 2025Q3 | +0.32 | +0.13 | +0.19 |
News (last 365d, 1000 articles): avg ticker sentiment +0.15 (bullish 18% / bearish 3%)
Scenario Analysis
The tree runs from a structural 'Structural — Traffic Loss / GLP-1 / Saturation' downside ($96) to a 'Bull — Premium Re-Rate' bull case ($386); the probability-weighted blend (PWEV $218) is +6% versus spot.
| Scenario | Probability | Target | Return |
|---|---|---|---|
| Structural — Traffic Loss / GLP-1 / Saturation | 20% | $96 | -53% |
| Consumer-Spending Recession | 17% | $163 | -21% |
| Base — Comps + Unit Growth | 35% | $226 | +10% |
| Growth — Digital / International Units | 20% | $305 | +48% |
| Bull — Premium Re-Rate | 8% | $386 | +87% |
| Probability-Weighted (PWEV) | — | $218 | +6% |
Scenario rationale — what each probability buys (the driver path behind every target):
- Structural — Traffic Loss / GLP-1 / Saturation (20%, $96). 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: 95.89; probability: 0.2.
- Consumer-Spending Recession (17%, $163). Cyclical downturn — restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) weakens for 1–2 years before normalising. Drivers — implied_target: 162.84; probability: 0.17.
- Base — Comps + Unit Growth (35%, $226). Mid-cycle — normalised restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate); disciplined capital allocation; steady returns. Drivers — implied_target: 226.16; probability: 0.35.
- Growth — Digital / International Units (20%, $305). Upside — digital + international unit growth lifts earnings above mid-cycle; the multiple expands modestly. Drivers — implied_target: 305.32; probability: 0.2.
- Bull — Premium Re-Rate (8%, $386). Upside tail — sustained tight conditions or a structural re-rate on digital + international unit growth. Drivers — implied_target: 385.61; 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 | $192 | -7% |
| Peer P/E re-rate | multiple | $292 | +42% |
| Peer EV/Revenue re-rate | multiple | $505 | +145% |
| Scenario PWEV | multiple | $218 | +6% |
| DCF (5-year + terminal) | cash flow + terminal × | $151 | -27% |
| Triangulated (weighted) | — | $195 | -5% |
Monte Carlo — the distribution, not a point
10,000 paths, Student-t shocks (fat tails) with a regime-switching overlay. The median lands at $192 and 45% of paths finish above spot. The variance decomposition shows the gross margin is the dominant swing factor (58% 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%, 16x terminal FCF multiple → $151. 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 $292. 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) | $12.8B | 100% | 5% | 13% | 19x | 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 | -5.94 |
Capital intensity & shareholder returns (ESTIMATE)
| Dimension | Assessment |
|---|---|
| capex_pct_revenue | 0.05 |
| div_yield | 0.0276 |
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 | $1B | $1B |
| FY+2 | $14B | $2B | $1B | $1B | $1B | $1B |
| FY+3 | $15B | $2B | $1B | $1B | $2B | $1B |
| FY+4 | $15B | $2B | $1B | $1B | $2B | $1B |
| FY+5 | $16B | $2B | $1B | $1B | $2B | $1B |
| Terminal | — | — | — | — | $2B × 16x | $17B |
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) $6B + PV(terminal) $17B = EV $23B; + net cash → equity $17B ÷ diluted shares 0.12B = $151/share (exit-multiple terminal).
- Gordon (perpetuity-growth) terminal at 2.5% → $176/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 ≈ 9% 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 → $292; EV/Rev → $505.
Weighted fair-value math
| Anchor | Value | Weight | Contribution |
|---|---|---|---|
| DCF | $151 | 41% | $62 |
| Scenario PWEV | $218 | 29% | $64 |
| Monte Carlo median | $192 | 18% | $34 |
| Peer P/E | $292 | 12% | $34 |
| Triangulated | — | 100% | $195 |
Sensitivity
DCF/share — WACC × terminal multiple
| WACC ＼ Term× | 11.2x | 13.6x | 16.0x | 18.4x | 20.8x |
|---|---|---|---|---|---|
| 6% | $119 | $144 | $169 | $194 | $219 |
| 7% | $112 | $136 | $160 | $184 | $208 |
| 8% | $106 | $129 | $151 | $174 | $197 |
| 9% | $100 | $121 | $143 | $165 | $187 |
| 10% | $94 | $115 | $135 | $156 | $177 |
DCF/share — revenue CAGR Δ × op-margin Δ
| CAGRΔ ＼ MgnΔ | -3.0pp | -1.5pp | +0.0pp | +1.5pp | +3.0pp |
|---|---|---|---|---|---|
| -3.0pp | $91 | $111 | $131 | $152 | $172 |
| -1.5pp | $98 | $120 | $141 | $163 | $184 |
| +0.0pp | $105 | $128 | $151 | $174 | $197 |
| +1.5pp | $113 | $138 | $162 | $187 | $211 |
| +3.0pp | $121 | $147 | $173 | $199 | $225 |
Tornado — DCF/share swing by driver (widest first)
| Driver | Low | High | Swing |
|---|---|---|---|
| Op margin ±3pp | $105 | $197 | $92 |
| Terminal × ±15% | $129 | $174 | $45 |
| Revenue CAGR ±3pp | $131 | $173 | $42 |
| WACC ±1pp | $143 | $160 | $17 |
| FCF conversion ±10% | $151 | $151 | $0 |
Company lever — SoP/share vs Restaurants (franchised / company) multiple (AI re-rating) (base 19x)
| Multiple | 13.3x | 16.1x | 19.0x | 21.8x | 24.7x |
|---|---|---|---|---|---|
| SoP/share | $1,429 | $1,740 | $2,063 | $2,375 | $2,698 |
Load-Bearing Assumptions
DCF: WACC 8%, terminal multiple 16×, FY+5 revenue $16B. 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 $96.
Fact / Inference / Speculation
- FACT: Spot $206; 52-week range $166–$219; engine rating HOLD; base-case target $218 (+6%).
- INFERENCE: Triangulated FV $195 (-5%). Gross Margin explains 58% 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 58% of outcome variance.
Recommendation: HOLD
Balanced: triangulated fair value $195 (-5% vs spot); the outcome hinges on Gross Margin. The debate is Gross Margin (58% of variance) — a fundamental call. SBC runs —M TTM (disclosed in the appendix).