Major US Company Doesn’t Know What It’s Doing
Sometimes it seems company management, despite getting paid millions of dollars each year, doesn’t know what it’s doing.
McDonald’s (ticker: MCD) stock price performance has been horrible in 2026.
Its stock price is down over 20% in 2026.
And it has fallen almost 30% since McDonald’s reached an all-time high at the end of February.
Yikes!
McDonald’s is one of the most “American” companies around, so what’s going on?
Inflation has hit consumers hard, but the fast food restaurant has taken it to the extreme.
Menu prices at McDonald’s restaurants have risen faster than inflation, and are also outpacing price increases at its competitors.
McDonald’s is now in a tough spot.
Sure, it’s still convenient and fast.
But the cost difference between McDonald’s and casual dining has narrowed, leading to many customers skipping their trip to the Golden Arches.
According to Placer.ai, traffic at McDonald’s locations has been dropping most months in 2026.
What’s the solution?
McDonald’s just had its investor day, and it was a disaster.
Management announced an $8.5 billion investment through 2036 to modernize its restaurants and improve technology.
The goal is to save money through efficiency improvements.
But spending billions of dollars to save money in the long run isn’t going to help the immediate problem.
McDonald’s needs to lower its prices now so it can better compete with the myriad of eating options available to consumers.
Investors hated the news and its stock price dropped almost 5%.
Now, the one part of McDonald’s that is cheap is its stock price.
Its current price-to-earnings (P/E) ratio of 19.2x hasn’t been lower in over a decade outside of the COVID crash in 2020.
So, it seems McDonald’s is a great bargain right now.
However, its P/E ratio is right in line with the ratio of the restaurant industry, and is higher than P/E ratios at competitors Wendy's (ticker: WEN) and Yum Brands (ticker: YUM).
Plus, McDonald’s growth has really stagnated.
McDonald’s hit about $8 billion in income a few years ago and has barely raised the number since.
EPS has grown, but most of the “growth” is from share buybacks, which lower share counts.
Buybacks are a good thing for investors, but they aren’t sustainable long-term.
And I’m far more concerned about McDonald’s inability to generate income growth.
So, if you own a lot of stock in McDonald’s, I’d consider selling some shares.
The fast-food giant could turn it around, but it needs to get back to serving inexpensive, convenient food to its customers.
And until it does, McDonald’s will continue to struggle.
When was the last time you ate at McDonald’s?
I haven’t eaten there in years because it’s gotten so expensive.
Coach Parker
Category: Stocks
