Expanding earnings justify these high P/Es

Article Excerpt

The share price for each of these fast-food leaders may seem expensive in relation to its earnings. However, we feel both p/e’s are reasonable given operational investments that should spur their earnings for years to come. MCDONALD’S CORP. $186 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector, Shares outstanding: 770.9 million; Market cap: $143.4 billion; Price-to-sales ratio: 6.8; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.mcdonalds.com) operates over 37,500 fast-food restaurants in 120 countries. McDonald’s aims to spur its long-term sales by updating most of its U.S. restaurants to include more self-order kiosks, new systems for more delivery orders and adding extra drive-thru lanes at some locations. The company expects to complete those upgrades by the end of 2022. It also continues to expand its home delivery. So far, over 15,000 McDonald’s outlets offer that service. At the same time, the company continues to reduce its operating costs by cutting management layers at its U.S. operations. That should make it easier for McDonald’s to…

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