Mcdonald’s (NYSE:MCD) and Texas Roadhouse (NASDAQ:TXRH) are both retail/wholesale companies, but which is the better stock? We will contrast the two companies based on the strength of their risk, dividends, valuation, institutional ownership, profitability, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Mcdonald’s and Texas Roadhouse, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mcdonald’s 0 7 20 0 2.74
Texas Roadhouse 3 11 5 0 2.11

Mcdonald’s currently has a consensus target price of $181.64, indicating a potential upside of 11.22%. Texas Roadhouse has a consensus target price of $63.19, indicating a potential downside of 7.71%. Given Mcdonald’s’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Mcdonald’s is more favorable than Texas Roadhouse.

Dividends

Mcdonald’s pays an annual dividend of $4.04 per share and has a dividend yield of 2.5%. Texas Roadhouse pays an annual dividend of $1.00 per share and has a dividend yield of 1.5%. Mcdonald’s pays out 60.7% of its earnings in the form of a dividend. Texas Roadhouse pays out 50.8% 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 raised its dividend for 41 consecutive years and Texas Roadhouse has raised its dividend for 7 consecutive years. Mcdonald’s is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

66.9% of Mcdonald’s shares are held by institutional investors. Comparatively, 91.4% of Texas Roadhouse shares are held by institutional investors. 0.2% of Mcdonald’s shares are held by insiders. Comparatively, 5.9% of Texas Roadhouse shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk & Volatility

Mcdonald’s has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500. Comparatively, Texas Roadhouse has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Profitability

This table compares Mcdonald’s and Texas Roadhouse’s 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%
Texas Roadhouse 6.76% 18.15% 12.19%

Valuation & Earnings

This table compares Mcdonald’s and Texas Roadhouse’s 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 5.55 $5.19 billion $6.66 24.52
Texas Roadhouse $2.22 billion 2.20 $131.52 million $1.97 34.76

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

Summary

Mcdonald’s beats Texas Roadhouse on 12 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.

Texas Roadhouse Company Profile

Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally. The company operates and franchises Texas Roadhouse and Bubba's 33 restaurants. As of February 20, 2018, it owned and operated approximately 550 restaurants. Texas Roadhouse, Inc. was founded in 1993 and is based in Louisville, Kentucky.

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