McDonald’s Corporation (NYSE: MCD) and Del Taco Restaurants (NASDAQ:TACO) are both retail/wholesale companies, but which is the better investment? We will compare the two companies based on the strength of their profitabiliy, earnings, risk, analyst recommendations, institutional ownership, dividends and valuation.

Dividends

McDonald’s Corporation pays an annual dividend of $3.76 per share and has a dividend yield of 2.4%. Del Taco Restaurants does not pay a dividend. McDonald’s Corporation pays out 61.5% of its earnings in the form of a dividend. Del Taco Restaurants has increased its dividend for 40 consecutive years.

Risk and Volatility

McDonald’s Corporation has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500. Comparatively, Del Taco Restaurants has a beta of -0.21, meaning that its stock price is 121% less volatile than the S&P 500.

Institutional and Insider Ownership

67.5% of McDonald’s Corporation shares are owned by institutional investors. Comparatively, 66.8% of Del Taco Restaurants shares are owned by institutional investors. 0.2% of McDonald’s Corporation shares are owned by insiders. Comparatively, 14.6% of Del Taco Restaurants shares are owned 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.

Profitability

This table compares McDonald’s Corporation and Del Taco Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
McDonald’s Corporation 21.00% -266.50% 16.33%
Del Taco Restaurants 4.81% 5.90% 3.08%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for McDonald’s Corporation and Del Taco Restaurants, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McDonald’s Corporation 0 9 22 0 2.71
Del Taco Restaurants 0 1 5 0 2.83

McDonald’s Corporation presently has a consensus target price of $162.05, suggesting a potential upside of 4.60%. Del Taco Restaurants has a consensus target price of $15.67, suggesting a potential upside of 22.78%. Given Del Taco Restaurants’ stronger consensus rating and higher possible upside, analysts clearly believe Del Taco Restaurants is more favorable than McDonald’s Corporation.

Earnings & Valuation

This table compares McDonald’s Corporation and Del Taco Restaurants’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
McDonald’s Corporation $24.18 billion 5.22 $9.57 billion $6.11 25.36
Del Taco Restaurants $468.58 million 1.05 $67.62 million $0.56 22.79

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

Summary

McDonald’s Corporation beats Del Taco Restaurants on 11 of the 17 factors compared between the two stocks.

About McDonald’s Corporation

McDonald’s Corporation (McDonald’s) operates and franchises McDonald’s restaurants. The Company’s restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company’s segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate. The U.S. segment focuses on offering a platform for authentic ingredients that allows customers to customize their sandwiches. Its High Growth Markets segment includes its operations in markets, such as China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands and related markets. The International Lead markets segment includes the Company’s operations in various markets, such as Australia, Canada, France, Germany, the United Kingdom and related markets. The Foundational markets and Corporate segment is engaged in operating restaurants and increasing convenience to customers, including through drive-thru and delivery.

About Del Taco Restaurants

Del Taco Restaurants, Inc. is an operator and franchisor of restaurants featuring made-to-order cuisine, including both Mexican inspired and American classic dishes. As of January 3, 2017, the Company operated 551 Del Taco restaurants. The Company’s menu offers a combination of Mexican-inspired food, such as tacos and burritos, and American classics, such as Double Del cheeseburgers, crinkle-cut fries and milkshakes. The Company’s menu features items, such as its Platos plated meals, Epic Burritos, Handcrafted Ensaladas and Fresca Bowls, as well as items on its Buck & Under Menu. As of January 3, 2017, the Company had 310 Company-operated and 241 franchise-operated restaurants. The Platos menu offering consists of individually plated meals complete with an entree, two sides, and chips and salsa. The Company’s menu also includes quesadillas, bowls and handcrafted ensaladas, as well as burgers and fries.

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