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McDonald's (MCD): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 2026, to Sep 30, 2026, filed Nov 6, 2026; rules v1.1
McDonald's (MCD): 1 rule of 10 triggered on the filings to Sep 30, 2026: FCF growth = the business improved. 1 to review; 3 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
FCF growth = the business improved Triggered · severity medium · confidence medium
Free cash flow rose $514M (+8%), from $6.7B to $7.2B, but working capital released $755M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital rose by $349M.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
A precise DCF value = the true value To review · confidence high
The DCF's point value is 277.63 a share (price 278.04); 84% of it is the terminal value, a number about years no one has seen. Moving wacc by ±1 pt alone takes it from 212.97 to 381.49; across every method the research ran the range is -22 to 636. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Triggered severity medium · confidence medium
Free cash flow rose $514M (+8%), from $6.7B to $7.2B, but working capital released $755M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital rose by $349M.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | $9.4B |
| Operating cash flow | $10.6B |
| Capex, year before | $2.8B |
| Capex | $3.4B |
| Free cash flow, year before | $6.7B |
| Free cash flow | $7.2B |
| Change in FCF | $514M |
| Change in capex | $590M |
| Working capital: change in its cash contribution | $755M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | $755M |
| Share of the increase that need not repeat | +146.9% |
| Operating cash flow before working capital: change | 349000000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 0.6% of revenue: small enough that adding it back changes little.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $165M |
| Revenue | $26.9B |
| SBC / revenue | +0.6% |
| Buybacks | $2.1B |
| Buybacks / SBC | 12.5 |
| Diluted shares, year before | 722 shares |
| Diluted shares | 716 shares |
| Diluted shares: change | -0.8% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Insufficient data
fewer than five quarters with receivables and revenue on file (a year-over-year comparison needs five)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
Nothing comes due within a year; net debt is $39.6B.
The figures and how they are read
| Cash and investments | $1.2B |
| Debt | $40.8B |
| Net debt | $39.6B |
| Due within a year | 0 |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $7.5B |
| Cash plus free cash flow | $8.7B |
| Coverage of what is due | — |
| Due in the second year | $3.2B |
| Balance sheet date | 2026-09-30 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY2025 (debt maturities, cash and investments)
D03 EPS growth = profit growth Insufficient data
no quarter with EPS, net income and diluted shares for both this year and last
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $8.8B is not at a cyclical high against the last eight years (median $7.5B, best $8.6B): the P/E of 22.4× is on a normal year.
The figures and how they are read
| market value | $196.9B |
| net income ttm | $8.8B |
| pe ttm | 22.40 |
| net income median fy | $7.5B |
| pe mid cycle | 26.10 |
| net income peak fy | $8.6B |
| years | FY2018 / 5924.0; FY2019 / 6025.0; FY2020 / 4730.0; FY2021 / 7545.0; FY2022 / 6177.0; FY2023 / 8469.0; FY2024 / 8223.0; FY2025 / 8563.0 |
| down years in window | 3 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 2026 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 277.63 a share (price 278.04); 84% of it is the terminal value, a number about years no one has seen. Moving wacc by ±1 pt alone takes it from 212.97 to 381.49; across every method the research ran the range is -22 to 636. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 277.63 |
| price | 278.04 |
| terminal value share | +84.1% |
| swing by input | WACC / ±1 pt / 212.97 / 381.49; Revenue growth (each year) / ±5 pts / 210.18 / 358.79; Terminal growth / ±0.5 pt / 252.41 / 309.4; Operating margin / ±3 pts / 255.3 / 299.96 |
| range all methods | -22.07; 636.47 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → McDonald's: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.