Jack In The Box (NASDAQ: JACK) and McDonald’s Corporation (NYSE:MCD) are both mid-cap retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, risk, valuation and profitability.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Jack In The Box and McDonald’s Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Jack In The Box 1 3 10 0 2.64
McDonald’s Corporation 0 8 23 0 2.74

Jack In The Box currently has a consensus price target of $113.38, indicating a potential upside of 8.99%. McDonald’s Corporation has a consensus price target of $170.01, indicating a potential upside of 2.79%. Given Jack In The Box’s higher possible upside, equities research analysts clearly believe Jack In The Box is more favorable than McDonald’s Corporation.

Profitability

This table compares Jack In The Box and McDonald’s Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Jack In The Box 8.51% -37.83% 10.39%
McDonald’s Corporation 24.19% -252.87% 16.44%

Institutional and Insider Ownership

96.1% of Jack In The Box shares are held by institutional investors. Comparatively, 68.0% of McDonald’s Corporation shares are held by institutional investors. 2.1% of Jack In The Box shares are held by company insiders. Comparatively, 0.2% of McDonald’s Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Jack In The Box pays an annual dividend of $1.60 per share and has a dividend yield of 1.5%. McDonald’s Corporation pays an annual dividend of $3.76 per share and has a dividend yield of 2.3%. Jack In The Box pays out 36.7% of its earnings in the form of a dividend. McDonald’s Corporation pays out 54.3% 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. Jack In The Box has raised its dividend for 40 consecutive years.

Valuation and Earnings

This table compares Jack In The Box and McDonald’s Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Jack In The Box $1.61 billion 1.90 $350.23 million $4.36 23.86
McDonald’s Corporation $24.18 billion 5.54 $9.60 billion $6.93 23.87

McDonald’s Corporation has higher revenue and earnings than Jack In The Box. Jack In The Box 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.

Risk & Volatility

Jack In The Box has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, McDonald’s Corporation has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.

Summary

McDonald’s Corporation beats Jack In The Box on 11 of the 17 factors compared between the two stocks.

Jack In The Box Company Profile

Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants (QSRs) and Qdoba Mexican Eats (Qdoba) fast-casual restaurants. The Company operates in two segments: Jack in the Box and Qdoba restaurant operations. Qdoba is a fast-casual Mexican food brand in the United States, offering food items including burritos, tacos, salads, and quesadillas. Jack in the Box is a hamburger chain, which offers a selection of products, including classic burgers such as, Jumbo Jack burgers, and new product lines, such as Buttery Jack burgers, and its Brunchfast menu. As of October 2, 2016, the Company operated 2,954 Jack in the Box QSRs and Qdoba fast-casual restaurants. As of October 2, 2016, Jack in the Box system included 2,255restaurants, of which 417 were company-operated and 1,838 were franchise operated. As of October 2, 2016, the Qdoba system included 699 restaurants, of which 367 were company operated and 332 were franchise operated.

McDonald’s Corporation Company Profile

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.

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