Stock Analysis on Net

McDonald’s Corp. (NYSE:MCD)

$24.99

Economic Value Added (EVA)

Microsoft Excel

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

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Economic Profit

McDonald’s Corp., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =


The analysis of the financial data over the five-year period reveals several noteworthy trends regarding profitability, capital efficiency, and economic value creation.

Net Operating Profit After Taxes (NOPAT)
NOPAT shows an overall increasing trend from 2020 to 2024, rising from $6,162 million in 2020 to $9,207 million in 2024. There is a significant increase between 2020 and 2021, followed by a decline in 2022. Subsequently, NOPAT recovers strongly in 2023 and stabilizes at a slightly lower level in 2024 compared to 2023.
Cost of Capital
The cost of capital exhibits a consistent upward trend, increasing steadily from 9.57% in 2020 to 10.46% in 2024. This indicates a gradual rise in the company's required return on invested capital, which could reflect changes in market conditions, perceived risk, or capital structure.
Invested Capital
Invested capital fluctuates over the years, starting at $46,817 million in 2020 and peaking at $50,097 million in 2023 before declining slightly to $49,627 million in 2024. The variation suggests ongoing adjustments in asset investments or working capital positions, with a notable dip in 2022 relative to 2021.
Economic Profit
Economic profit, which reflects the value generated over the cost of capital, generally improves across the period. Starting at $1,683 million in 2020, it more than doubles in 2021 to $3,736 million, then decreases in 2022 before experiencing a strong recovery in 2023. The 2024 figure remains slightly below the 2023 peak. This pattern corresponds broadly to fluctuations in NOPAT and investments, demonstrating effective value creation despite rising capital costs.

Overall, the company has enhanced its operating profitability and economic profit despite an increasing cost of capital. Invested capital has experienced moderate variability but remains close to the initial level after a peak in 2023. The company's ability to generate economic profit above the cost of capital throughout the period indicates sustained value creation, although the dip in 2022 suggests some challenges during that year requiring further investigation.


Net Operating Profit after Taxes (NOPAT)

McDonald’s Corp., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income
Deferred income tax expense (benefit)1
Increase (decrease) in deferred revenues, initial franchise fees2
Increase (decrease) in equity equivalents3
Interest expense, net of capitalized interest
Interest expense, operating lease liability4
Adjusted interest expense, net of capitalized interest
Tax benefit of interest expense, net of capitalized interest5
Adjusted interest expense, net of capitalized interest, after taxes6
Net operating profit after taxes (NOPAT)

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in deferred revenues, initial franchise fees.

3 Addition of increase (decrease) in equity equivalents to net income.

4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2024 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =

6 Addition of after taxes interest expense to net income.


The data reveals the financial performance of the company over a five-year period, highlighting trends in net income and net operating profit after taxes (NOPAT).

Net Income
There was a noticeable increase in net income from 2020 to 2021, rising from $4,731 million to $7,545 million. This was followed by a decline in 2022 to $6,177 million. Subsequently, net income rebounded strongly in 2023 to $8,469 million, before experiencing a slight decrease in 2024 to $8,223 million. Overall, net income exhibited volatility but maintained an upward trend across the period, ending significantly higher than the initial year.
Net Operating Profit After Taxes (NOPAT)
NOPAT demonstrated a similar pattern to net income across the five years. Starting at $6,162 million in 2020, it increased to $8,491 million in 2021, then declined to $7,131 million in 2022. The figure rose again in 2023 to $9,274 million and slightly decreased in 2024 to $9,207 million. The overall trend shows growth over the period with some fluctuations, indicating effective operational profitability maximized after tax impacts.
Comparative Insights
The parallel movement between net income and NOPAT suggests a consistent relationship between operating efficiency and overall profitability. Both metrics experienced peak values in 2023, followed by modest declines in 2024. Despite the dips in 2022 and 2024, the data reflects resilience and recovery in financial performance, emphasizing the company's ability to manage profits through varying economic conditions.

Cash Operating Taxes

McDonald’s Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense, net of capitalized interest
Cash operating taxes

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).


Provision for Income Taxes
The provision for income taxes shows a consistent upward trend from 2020 to 2024. Starting at 1,410 million USD in 2020, it increased moderately to 1,583 million USD in 2021, and 1,648 million USD in 2022. There was a more pronounced rise in 2023 to 2,053 million USD, followed by a smaller increase to 2,121 million USD in 2024. Overall, this indicates a steady growth in the anticipated income tax expense over the five-year period.
Cash Operating Taxes
Cash operating taxes also exhibit a clear upward trajectory during the same period. Beginning at 1,772 million USD in 2020, the amount rose significantly to 2,367 million USD in 2021. It remained relatively stable in 2022 with a slight decrease to 2,334 million USD but then surged to 3,128 million USD in 2023. In 2024, there was a marginal decrease to 3,112 million USD. Despite the minor fluctuations, the overall pattern reflects increasing cash tax outflows over the years.
Comparative Insights
Both provision for income taxes and cash operating taxes demonstrate upward trends, indicating increasing tax obligations and cash outflows related to taxes. The cash operating taxes consistently exceed the provision for income taxes each year, with the gap widening particularly in 2023 and 2024. This could imply differences in timing, payment schedules, or adjustments between the accrual-based provision and actual cash payments. The growth in tax-related expenses corresponds with expected increases in earnings or taxable income, reflecting an expansion in the company's tax base or changes in tax rates and regulations over time.

Invested Capital

McDonald’s Corp., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Short-term borrowings and current maturities of long-term debt
Current finance lease liability
Long-term debt, excluding current maturities
Long-term finance lease liability
Operating lease liability1
Total reported debt & leases
Shareholders’ equity (deficit)
Net deferred tax (assets) liabilities2
Deferred revenues, initial franchise fees3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Adjusted shareholders’ equity (deficit)
Investments6
Invested capital

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of deferred revenues, initial franchise fees.

4 Addition of equity equivalents to shareholders’ equity (deficit).

5 Removal of accumulated other comprehensive income.

6 Subtraction of investments.


Total Reported Debt & Leases

The total reported debt and leases values show a generally fluctuating trend over the five-year period. Beginning at 51,463 million US dollars in 2020, the amount decreased to 49,349 million in 2021 and further slightly declined to 48,699 million in 2022. However, a notable increase occurred in 2023, rising to 53,091 million before slightly decreasing again to 51,948 million in 2024. This pattern indicates a period of debt reduction followed by renewed borrowing or lease commitments, and then a minor contraction.

Shareholders’ Equity (Deficit)

The shareholders’ equity, reported as a deficit throughout the period, displays a fluctuating but improving trend after an initial deterioration. Starting at a deficit of -7,825 million US dollars in 2020, the deficit narrowed to -4,601 million in 2021, suggesting an improvement in net assets. Subsequently, it worsened again to -6,003 million in 2022 but improved substantially to -4,707 million in 2023, and further to -3,797 million in 2024. Overall, despite remaining negative, the equity position shows a gradual reduction in deficit size toward the end of the period.

Invested Capital

The invested capital shows moderate year-to-year variation. Starting at 46,817 million US dollars in 2020, it increased slightly to 47,779 million in 2021 before decreasing to 45,461 million in 2022. This is followed by a considerable increase to 50,097 million in 2023, before a slight decline to 49,627 million in 2024. The data suggests fluctuating levels of capital invested in the business, with a peak in 2023 and a mild reduction afterward but still maintaining a level above the initial years.

Summary Insights

The overall financial structure reflects a company managing its debt and equity with some volatility. The fluctuations in total reported debt and leases indicate active adjustments in financing strategies. Despite a consistent equity deficit, the trend toward reducing the deficit over time is a positive sign of improving net asset value. Invested capital variations imply measured reinvestment and capital allocation strategies, with a peak in 2023 suggesting increased operational or strategic investment that is somewhat maintained in 2024. The combined trends show an entity engaged in dynamic financial management amid a negative but improving equity backdrop.


Cost of Capital

McDonald’s Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt obligations and finance lease liability3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt obligations and finance lease liability. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt obligations and finance lease liability3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt obligations and finance lease liability. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt obligations and finance lease liability3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt obligations and finance lease liability. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt obligations and finance lease liability3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt obligations and finance lease liability. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt obligations and finance lease liability3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt obligations and finance lease liability. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

McDonald’s Corp., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Airbnb Inc.
Booking Holdings Inc.
Chipotle Mexican Grill Inc.
Starbucks Corp.

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


Economic profit
The economic profit demonstrated fluctuations over the five-year period. It initially increased substantially from 1,683 million US dollars in 2020 to 3,736 million in 2021, indicating a strong improvement. However, it declined to 2,444 million in 2022, before rising again to reach a peak of 4,097 million in 2023. In 2024, economic profit slightly decreased to 4,017 million, suggesting stabilization at a relatively high level compared to earlier years.
Invested capital
The invested capital showed a generally moderate upward trend with some variations. It increased from 46,817 million US dollars in 2020 to 47,779 million in 2021. A decrease followed in 2022, bringing the value down to 45,461 million. Subsequently, there was a notable increase in 2023 to 50,097 million, followed by a slight reduction to 49,627 million in 2024. Overall, the capital invested has remained within a relatively narrow range, with a gradual increase over the period.
Economic spread ratio
The economic spread ratio, which measures the return on invested capital relative to the cost of capital, reflected a pattern similar to economic profit. Starting at 3.59% in 2020, it nearly doubled to 7.82% in 2021, showing improved profitability. The ratio then decreased to 5.38% in 2022, before rising to its highest point of 8.18% in 2023. A slight decline to 8.09% was observed in 2024, indicating sustained strong returns on invested capital during the latter part of the period.

Economic Profit Margin

McDonald’s Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1
 
Revenues
Add: Increase (decrease) in deferred revenues, initial franchise fees
Adjusted revenues
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Airbnb Inc.
Booking Holdings Inc.
Chipotle Mexican Grill Inc.
Starbucks Corp.

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =

3 Click competitor name to see calculations.


The financial data shows notable fluctuations and overall growth trends over the five-year period. The economic profit exhibits a significant increase from 2020 to 2021, rising from 1,683 million US dollars to 3,736 million US dollars. However, this figure declines to 2,444 million US dollars in 2022 before increasing again and peaking at 4,097 million US dollars in 2023, with a slight decrease to 4,017 million US dollars in 2024.

Adjusted revenues demonstrate a consistent upward trend throughout the period. Starting at 19,249 million US dollars in 2020, revenues increased steadily each year, reaching 25,908 million US dollars by the end of 2024. This reflects a positive growth trajectory in the company’s top-line performance despite minor year-to-year variability in economic profit.

The economic profit margin follows a pattern similar to that of economic profit itself. It rises sharply from 8.74% in 2020 to over 16% in 2021, then drops to approximately 10.53% in 2022. It recovers to around 16.05% in 2023 and slightly decreases to 15.51% in 2024. This indicates fluctuating profitability relative to revenues, suggesting variations in operational efficiency or cost management during the period.

Economic Profit
Exhibits volatility with a strong increase in 2021, a dip in 2022, followed by recovery and slight stabilization in 2023 and 2024.
Adjusted Revenues
Shows continuous growth across all years, indicating steady revenue expansion.
Economic Profit Margin
Reflects the trend in economic profit with peaks in 2021 and 2023, showing variability in profitability relative to revenues but generally maintaining a margin above 8%.

Overall, the data suggests that while the company has effectively grown its revenues steadily over the period, economic profit and profit margins have been subject to more pronounced fluctuations, which merit further investigation into factors affecting cost control and operational efficiency during specific years.