McDonald’s Corporation (NYSE: MCD) and Domino’s Pizza (NYSE:DPZ) are both mid-cap retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, institutional ownership, valuation, analyst recommendations and risk.

Risk and Volatility

McDonald’s Corporation has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500. Comparatively, Domino’s Pizza has a beta of 0.35, indicating that its stock price is 65% less volatile than the S&P 500.

Profitability

This table compares McDonald’s Corporation and Domino’s Pizza’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
McDonald’s Corporation 21.00% -264.89% 16.21%
Domino’s Pizza 9.40% -13.28% 34.03%

Dividends

McDonald’s Corporation pays an annual dividend of $3.76 per share and has a dividend yield of 2.4%. Domino’s Pizza pays an annual dividend of $1.84 per share and has a dividend yield of 1.0%. McDonald’s Corporation pays out 61.5% of its earnings in the form of a dividend. Domino’s Pizza pays out 36.7% 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 Corporation has raised its dividend for 40 consecutive years and Domino’s Pizza has raised its dividend for 3 consecutive years. McDonald’s Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and recommmendations for McDonald’s Corporation and Domino’s Pizza, 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
Domino’s Pizza 0 10 9 0 2.47

McDonald’s Corporation currently has a consensus target price of $162.05, suggesting a potential upside of 2.72%. Domino’s Pizza has a consensus target price of $193.93, suggesting a potential upside of 2.80%. Given Domino’s Pizza’s higher probable upside, analysts clearly believe Domino’s Pizza is more favorable than McDonald’s Corporation.

Institutional and Insider Ownership

68.2% of McDonald’s Corporation shares are owned by institutional investors. Comparatively, 99.4% of Domino’s Pizza shares are owned by institutional investors. 0.2% of McDonald’s Corporation shares are owned by company insiders. Comparatively, 3.6% of Domino’s Pizza shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares McDonald’s Corporation and Domino’s Pizza’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
McDonald’s Corporation $24.18 billion 5.28 $9.60 billion $6.11 25.82
Domino’s Pizza $2.64 billion 3.45 $510.89 million $5.02 37.58

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

Summary

McDonald’s Corporation beats Domino’s Pizza on 10 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 Domino’s Pizza

Domino’s Pizza, Inc. is a pizza restaurant chain company. As of January 1, 2017, the Company operated in over 13,800 locations in over 85 markets around the world. The Company operates through three segments: domestic stores, international franchise and supply chain. Its basic menu features pizza products in various sizes and crust types. As of January 1, 2017, its Domestic Stores segment consisted primarily of its franchise operations, which consisted of 4,979 franchised stores located in the contiguous United States. As of January 1, 2017, its International Franchise segment consisted of a network of franchised stores in over 85 international markets. As of January 1, 2017, its supply chain segment operated 18 regional dough manufacturing and food supply chain centers in the United States, one thin crust manufacturing center, one vegetable processing center and one center providing equipment and supplies to certain of its domestic and international stores.

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