Rating: HOLD
| Metric | Value |
|---|---|
| Current Price | $102 |
| Triangulated Fair Value | $81 |
| 12-mo Scenario PWEV | $103 |
| Implied Return | -21% |
| Forward P/E | 34.8x |
| Market Cap | $116B |
| 52-Week Range | $76 – $108 |
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 $182, +78% vs spot. It needs Gross Margin to surprise to the upside.
The dashboard below is the whole argument on one page: spot ($102) 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 $45, -56% vs spot. This sits below the 52-week low — a genuine structural impairment, not a mild pullback.
Key Debate
Gross Margin explains 66% 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 +0.71 vs analyst floor +0.00 → delta +0.71 (n=17 mgmt / 10 Q&A; 98th pctile across the S&P book, z +1.9).
Flag: ELEVATED — management unusually upbeat vs the analyst floor relative to peers (disconfirmation watch).
| Quarter | Mgmt | Analyst | Delta |
|---|---|---|---|
| 2026Q2 | +0.71 | +0.00 | +0.71 |
| 2026Q1 | +0.57 | +0.29 | +0.28 |
| 2025Q4 | +0.47 | +0.27 | +0.20 |
| 2025Q3 | +0.54 | +0.45 | +0.10 |
News (last 365d, 1000 articles): avg ticker sentiment +0.13 (bullish 13% / bearish 3%)
Scenario Analysis
The tree runs from a structural 'Structural — Traffic Loss / GLP-1 / Saturation' downside ($45) to a 'Bull — Premium Re-Rate' bull case ($182); the probability-weighted blend (PWEV $103) is +1% versus spot.
| Scenario | Probability | Target | Return |
|---|---|---|---|
| Structural — Traffic Loss / GLP-1 / Saturation | 20% | $45 | -56% |
| Consumer-Spending Recession | 17% | $77 | -25% |
| Base — Comps + Unit Growth | 35% | $107 | +5% |
| Growth — Digital / International Units | 20% | $144 | +41% |
| Bull — Premium Re-Rate | 8% | $182 | +78% |
| Probability-Weighted (PWEV) | — | $103 | +1% |
Scenario rationale — what each probability buys (the driver path behind every target):
- Structural — Traffic Loss / GLP-1 / Saturation (20%, $45). 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: 45.28; probability: 0.2.
- Consumer-Spending Recession (17%, $77). Cyclical downturn — restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) weakens for 1–2 years before normalising. Drivers — implied_target: 76.89; probability: 0.17.
- Base — Comps + Unit Growth (35%, $107). Mid-cycle — normalised restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate); disciplined capital allocation; steady returns. Drivers — implied_target: 106.79; probability: 0.35.
- Growth — Digital / International Units (20%, $144). Upside — digital + international unit growth lifts earnings above mid-cycle; the multiple expands modestly. Drivers — implied_target: 144.16; probability: 0.2.
- Bull — Premium Re-Rate (8%, $182). Upside tail — sustained tight conditions or a structural re-rate on digital + international unit growth. Drivers — implied_target: 182.07; 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 | $91 | -11% |
| Peer P/E re-rate | multiple | $65 | -36% |
| Peer EV/Revenue re-rate | multiple | $149 | +46% |
| Scenario PWEV | multiple | $103 | +1% |
| DCF (5-year + terminal) | cash flow + terminal × | $65 | -36% |
| Triangulated (weighted) | — | $81 | -21% |
Rating vs blend — the key debate. The rating tracks the multiple-discipline fair value (Monte Carlo $91 + scenario PWEV $103, ≈ spot); the weighted blend $81 (-21%) sits below it because the cash-flow DCF ($65) 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 $91 and 42% of paths finish above spot. The variance decomposition shows the gross margin is the dominant swing factor (66% 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%, 30x terminal FCF multiple → $65. 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 $65. 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) | $38.5B | 100% | 5% | 11% | 35x | 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 | -22.86 |
Capital intensity & shareholder returns (ESTIMATE)
| Dimension | Assessment |
|---|---|
| capex_pct_revenue | 0.05 |
| div_yield | 0.0239 |
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 | $40B | $4B | $2B | $2B | $3B | $3B |
| FY+2 | $42B | $5B | $2B | $2B | $4B | $3B |
| FY+3 | $44B | $5B | $2B | $2B | $4B | $3B |
| FY+4 | $46B | $5B | $2B | $2B | $4B | $3B |
| FY+5 | $47B | $5B | $2B | $2B | $4B | $3B |
| Terminal | — | — | — | — | $4B × 30x | $82B |
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) $15B + PV(terminal) $82B = EV $97B; + net cash → equity $74B ÷ diluted shares 1.14B = $65/share (exit-multiple terminal).
- Gordon (perpetuity-growth) terminal at 2.5% → $38/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 ≈ 7% vs WACC 8% → below WACC — the incremental build is value-dilutive.
Peer set
| Peer | EV/Rev | Fwd P/E | Growth | Op margin |
|---|---|---|---|---|
| MCD | 9.05x | 21.1x | 5% | 44% |
| YUM | 6.3x | 23.42x | 5% | 31% |
| CMG | 3.709x | 27.55x | 5% | 13% |
| DRI | 2.381x | 18.55x | 5% | 13% |
| Median | 5.0045x | 22.26x | — | — |
Peer-median fwd P/E → $65; EV/Rev → $149.
Weighted fair-value math
| Anchor | Value | Weight | Contribution |
|---|---|---|---|
| DCF | $65 | 41% | $27 |
| Scenario PWEV | $103 | 29% | $30 |
| Monte Carlo median | $91 | 18% | $16 |
| Peer P/E | $65 | 12% | $8 |
| Triangulated | — | 100% | $81 |
Sensitivity
DCF/share — WACC × terminal multiple
| WACC ＼ Term× | 21.0x | 25.5x | 30.0x | 34.5x | 39.0x |
|---|---|---|---|---|---|
| 6% | $49 | $61 | $73 | $85 | $97 |
| 7% | $46 | $58 | $69 | $80 | $92 |
| 8% | $44 | $54 | $65 | $76 | $87 |
| 9% | $41 | $51 | $62 | $72 | $82 |
| 10% | $38 | $48 | $58 | $68 | $78 |
DCF/share — revenue CAGR Δ × op-margin Δ
| CAGRΔ ＼ MgnΔ | -3.0pp | -1.5pp | +0.0pp | +1.5pp | +3.0pp |
|---|---|---|---|---|---|
| -3.0pp | $37 | $47 | $57 | $67 | $77 |
| -1.5pp | $39 | $50 | $61 | $72 | $82 |
| +0.0pp | $42 | $54 | $65 | $77 | $88 |
| +1.5pp | $45 | $57 | $70 | $82 | $94 |
| +3.0pp | $48 | $61 | $74 | $87 | $101 |
Tornado — DCF/share swing by driver (widest first)
| Driver | Low | High | Swing |
|---|---|---|---|
| Op margin ±3pp | $42 | $88 | $46 |
| Terminal × ±15% | $54 | $76 | $22 |
| Revenue CAGR ±3pp | $57 | $74 | $17 |
| WACC ±1pp | $62 | $69 | $7 |
| FCF conversion ±10% | $65 | $65 | $0 |
Company lever — SoP/share vs Restaurants (franchised / company) multiple (AI re-rating) (base 35x)
| Multiple | 24.5x | 29.8x | 35.0x | 40.2x | 45.5x |
|---|---|---|---|---|---|
| SoP/share | $807 | $986 | $1,162 | $1,338 | $1,517 |
Load-Bearing Assumptions
DCF: WACC 8%, terminal multiple 30×, FY+5 revenue $47B. 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 $45.
Fact / Inference / Speculation
- FACT: Spot $102; 52-week range $76–$108; engine rating HOLD; base-case target $103 (+1%).
- INFERENCE: Triangulated FV $81 (-21%). Gross Margin explains 66% 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 66% of outcome variance.
Recommendation: HOLD
Balanced: triangulated fair value $81 (-21% vs spot); the outcome hinges on Gross Margin. The debate is Gross Margin (66% of variance) — a fundamental call. SBC runs —M TTM (disclosed in the appendix).