Stock Analysis on Net

McDonald’s Corp. (NYSE:MCD)

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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 thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 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), 10-K (reporting date: 2019-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. McDonald’s Corp. economic profit decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Net Operating Profit after Taxes (NOPAT)

McDonald’s Corp., NOPAT calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
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: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2023 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.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. McDonald’s Corp. NOPAT decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Cash Operating Taxes

McDonald’s Corp., cash operating taxes calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
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: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. McDonald’s Corp. cash operating taxes decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Invested Capital

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

US$ in thousands

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
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: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. McDonald’s Corp. invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

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: 2023-12-31).

1 US$ in thousands

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 thousands

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 thousands

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 thousands

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: 2019-12-31).

1 US$ in thousands

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, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Airbnb Inc.
Booking Holdings Inc.
Carnival Corp. & plc
Chipotle Mexican Grill Inc.
Starbucks Corp.

Based on: 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), 10-K (reporting date: 2019-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. McDonald’s Corp. economic spread ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.

Economic Profit Margin

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

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
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.
Carnival Corp. & plc
Chipotle Mexican Grill Inc.
Starbucks Corp.

Based on: 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), 10-K (reporting date: 2019-12-31).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. McDonald’s Corp. economic profit margin deteriorated from 2021 to 2022 but then improved from 2022 to 2023 not reaching 2021 level.