Rating: HOLD
| Metric | Value |
|---|---|
| Current Price | $160 |
| Triangulated Fair Value | $126 |
| 12-mo Scenario PWEV | $148 |
| Implied Return | -21% |
| Forward P/E | 24.8x |
| Market Cap | $45B |
| 52-Week Range | $135 – $169 |
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 $262, +64% vs spot. It needs the multiple to hold or expand.
The dashboard below is the whole argument on one page: spot ($160) 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 $65, -59% vs spot. This sits below the 52-week low — a genuine structural impairment, not a mild pullback.
Key Debate
P/E Multiple explains 70% of Monte Carlo outcome variance — i.e. value is set by the multiple the market will pay, a rate/sentiment regime bet as much as an earnings bet.
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 +0.59 vs analyst floor +0.00 → delta +0.59 (n=16 mgmt / 10 Q&A; 87th pctile across the S&P book, z +1.2).
Flag: ELEVATED — management unusually upbeat vs the analyst floor relative to peers (disconfirmation watch).
| Quarter | Mgmt | Analyst | Delta |
|---|---|---|---|
| 2026Q1 | +0.59 | +0.00 | +0.59 |
| 2025Q4 | +0.60 | +0.20 | +0.40 |
| 2025Q3 | +0.54 | +0.27 | +0.27 |
| 2025Q2 | +0.58 | +0.42 | +0.15 |
News (last 365d, 1000 articles): avg ticker sentiment +0.17 (bullish 20% / bearish 2%)
Scenario Analysis
The tree runs from a structural 'Structural — Traffic Loss / GLP-1 / Saturation' downside ($65) to a 'Bull — Premium Re-Rate' bull case ($262); the probability-weighted blend (PWEV $148) is -7% versus spot.
| Scenario | Probability | Target | Return |
|---|---|---|---|
| Structural — Traffic Loss / GLP-1 / Saturation | 20% | $65 | -59% |
| Consumer-Spending Recession | 17% | $111 | -31% |
| Base — Comps + Unit Growth | 35% | $154 | -4% |
| Growth — Digital / International Units | 20% | $208 | +30% |
| Bull — Premium Re-Rate | 8% | $262 | +64% |
| Probability-Weighted (PWEV) | — | $148 | -7% |
Scenario rationale — what each probability buys (the driver path behind every target):
- Structural — Traffic Loss / GLP-1 / Saturation (20%, $65). 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: 65.27; probability: 0.2.
- Consumer-Spending Recession (17%, $111). Cyclical downturn — restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate) weakens for 1–2 years before normalising. Drivers — implied_target: 110.85; probability: 0.17.
- Base — Comps + Unit Growth (35%, $154). Mid-cycle — normalised restaurant traffic + comps + unit growth vs labor/commodity costs (GLP-1 debate); disciplined capital allocation; steady returns. Drivers — implied_target: 153.95; probability: 0.35.
- Growth — Digital / International Units (20%, $208). Upside — digital + international unit growth lifts earnings above mid-cycle; the multiple expands modestly. Drivers — implied_target: 207.84; probability: 0.2.
- Bull — Premium Re-Rate (8%, $262). Upside tail — sustained tight conditions or a structural re-rate on digital + international unit growth. Drivers — implied_target: 262.49; 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 | $134 | -16% |
| Peer P/E re-rate | multiple | $157 | -2% |
| Peer EV/Revenue re-rate | multiple | $72 | -55% |
| Scenario PWEV | multiple | $148 | -7% |
| DCF (5-year + terminal) | cash flow + terminal × | $98 | -39% |
| Triangulated (weighted) | — | $126 | -21% |
Rating vs blend — the key debate. The rating tracks the multiple-discipline fair value (Monte Carlo $134 + scenario PWEV $148, ≈ spot); the weighted blend $126 (-21%) sits below it because the cash-flow DCF ($98) 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 $134 and 31% of paths finish above spot. The variance decomposition shows the p/e multiple is the dominant swing factor (70% of variance). Value is a multiple bet: fundamentals move the answer far less than the rating does.
DCF — the cash-flow anchor
Independent of the market multiple: a 5-year path, WACC 8.0%, 20x terminal FCF multiple → $98. 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 24.325000000000003x) implies $157. 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) | $8.5B | 100% | 5% | 26% | 23x | 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 | -11.27 |
Capital intensity & shareholder returns (ESTIMATE)
| Dimension | Assessment |
|---|---|
| capex_pct_revenue | 0.05 |
| div_yield | 0.0143 |
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 | $9B | $2B | $0B | $0B | $2B | $2B |
| FY+2 | $9B | $3B | $0B | $0B | $2B | $2B |
| FY+3 | $10B | $3B | $0B | $0B | $2B | $2B |
| FY+4 | $10B | $3B | $1B | $0B | $2B | $2B |
| FY+5 | $10B | $3B | $1B | $0B | $2B | $2B |
| Terminal | — | — | — | — | $2B × 20x | $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) $8B + PV(terminal) $30B = EV $39B; + net cash → equity $27B ÷ diluted shares 0.28B = $98/share (exit-multiple terminal).
- Gordon (perpetuity-growth) terminal at 2.5% → $90/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 ≈ 18% 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% |
| CMG | 3.709x | 27.55x | 5% | 13% |
| DRI | 2.381x | 18.55x | 5% | 13% |
| Median | 3.6775x | 24.325000000000003x | — | — |
Peer-median fwd P/E → $157; EV/Rev → $72.
Weighted fair-value math
| Anchor | Value | Weight | Contribution |
|---|---|---|---|
| DCF | $98 | 41% | $40 |
| Scenario PWEV | $148 | 29% | $44 |
| Monte Carlo median | $134 | 18% | $24 |
| Peer P/E | $157 | 12% | $18 |
| Triangulated | — | 100% | $126 |
Sensitivity
DCF/share — WACC × terminal multiple
| WACC ＼ Term× | 14.0x | 17.0x | 20.0x | 23.0x | 26.0x |
|---|---|---|---|---|---|
| 6% | $74 | $92 | $110 | $128 | $146 |
| 7% | $69 | $87 | $104 | $121 | $138 |
| 8% | $65 | $81 | $98 | $114 | $130 |
| 9% | $61 | $76 | $92 | $108 | $123 |
| 10% | $57 | $72 | $87 | $101 | $116 |
DCF/share — revenue CAGR Δ × op-margin Δ
| CAGRΔ ＼ MgnΔ | -3.0pp | -1.5pp | +0.0pp | +1.5pp | +3.0pp |
|---|---|---|---|---|---|
| -3.0pp | $69 | $76 | $82 | $89 | $95 |
| -1.5pp | $76 | $83 | $90 | $97 | $104 |
| +0.0pp | $83 | $90 | $98 | $105 | $113 |
| +1.5pp | $90 | $98 | $106 | $114 | $122 |
| +3.0pp | $98 | $106 | $115 | $123 | $132 |
Tornado — DCF/share swing by driver (widest first)
| Driver | Low | High | Swing |
|---|---|---|---|
| Terminal × ±15% | $81 | $114 | $33 |
| Revenue CAGR ±3pp | $82 | $115 | $33 |
| Op margin ±3pp | $83 | $113 | $30 |
| WACC ±1pp | $92 | $104 | $12 |
| FCF conversion ±10% | $98 | $98 | $0 |
Company lever — SoP/share vs Restaurants (franchised / company) multiple (AI re-rating) (base 23x)
| Multiple | 16.1x | 19.6x | 23.0x | 26.4x | 29.9x |
|---|---|---|---|---|---|
| SoP/share | $450 | $557 | $660 | $764 | $871 |
Load-Bearing Assumptions
DCF: WACC 8%, terminal multiple 20×, FY+5 revenue $10B. Triangulation leans 41% on DCF, 29% on PWEV.
Reasons the Thesis Could Fail (Falsifiable)
The valuation is multiple-dependent (70% of variance); a de-rating toward the DCF anchor ($98) implies -39%.
Fact / Inference / Speculation
- FACT: Spot $160; 52-week range $135–$169; engine rating HOLD; base-case target $148 (-7%).
- INFERENCE: Triangulated FV $126 (-21%). P/E Multiple explains 70% of Monte Carlo outcome variance — i.e. value is set by the multiple the market will pay, a rate/sentiment regime bet as much as an earnings bet.
- SPECULATION: At current prices the embedded bet is that the multiple holds or expands — P/E Multiple carries 70% of outcome variance.
Recommendation: HOLD
Balanced: triangulated fair value $126 (-21% vs spot); the outcome hinges on P/E Multiple. The debate is P/E Multiple (70% of variance) — fundamentally a multiple/regime call. SBC runs —M TTM (disclosed in the appendix).