Mcdonald’s (NYSE:MCD) and Darden Restaurants (NYSE:DRI) are both large-cap retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, earnings, institutional ownership, profitability, dividends, analyst recommendations and valuation.

Volatility and Risk

Mcdonald’s has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500. Comparatively, Darden Restaurants has a beta of 0.15, indicating that its stock price is 85% less volatile than the S&P 500.

Insider & Institutional Ownership

66.9% of Mcdonald’s shares are held by institutional investors. Comparatively, 89.5% of Darden Restaurants shares are held by institutional investors. 0.2% of Mcdonald’s shares are held by company insiders. Comparatively, 0.7% of Darden Restaurants shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Mcdonald’s and Darden Restaurants’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Mcdonald’s $22.82 billion 5.66 $5.19 billion $6.66 24.99
Darden Restaurants $8.08 billion 1.73 $596.00 million $4.81 23.51

Mcdonald’s has higher revenue and earnings than Darden Restaurants. Darden Restaurants is trading at a lower price-to-earnings ratio than Mcdonald’s, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Mcdonald’s and Darden Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mcdonald’s 25.26% -133.89% 17.46%
Darden Restaurants 7.84% 30.32% 11.95%

Analyst Recommendations

This is a summary of recent ratings and target prices for Mcdonald’s and Darden Restaurants, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mcdonald’s 0 7 20 0 2.74
Darden Restaurants 1 9 14 0 2.54

Mcdonald’s currently has a consensus target price of $181.64, suggesting a potential upside of 9.15%. Darden Restaurants has a consensus target price of $119.73, suggesting a potential upside of 5.88%. Given Mcdonald’s’ stronger consensus rating and higher possible upside, analysts clearly believe Mcdonald’s is more favorable than Darden Restaurants.

Dividends

Mcdonald’s pays an annual dividend of $4.04 per share and has a dividend yield of 2.4%. Darden Restaurants pays an annual dividend of $1.89 per share and has a dividend yield of 1.7%. Mcdonald’s pays out 60.7% of its earnings in the form of a dividend. Darden Restaurants pays out 39.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Mcdonald’s has increased its dividend for 41 consecutive years. Mcdonald’s is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Mcdonald’s beats Darden Restaurants on 13 of the 17 factors compared between the two stocks.

Mcdonald’s Company Profile

McDonald's Corporation operates and franchises McDonald's restaurants in the United States and internationally. Its restaurants offer various food products, soft drinks, coffee, and other beverages, as well as breakfast menu. As of December 31, 2017, the company operated 37,241 restaurants, including 34,108 franchised restaurants comprising 21,366 franchised to conventional franchisees, 6,945 licensed to developmental licensees, and 5,797 licensed to foreign affiliates; and 3,133 company-operated restaurants. McDonald's Corporation was founded in 1940 and is headquartered in Chicago, Illinois.

Darden Restaurants Company Profile

Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada. As of May 27, 2018, it owned and operated approximately 1,746 restaurants under the Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Bahama Breeze, Seasons 52, and Eddie V's brands. The company was founded in 1968 and is based in Orlando, Florida.

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