McDonald's vs Walmart Which Is More Favorable?

McDonald's and Walmart are two of the most renowned and successful companies in the world, each with a significant presence in the global market. Both companies have proven track records of delivering strong financial performance and consistently providing value to their shareholders. However, their approaches to business and growth strategies differ significantly, leading to unique opportunities and challenges for investors considering investing in their stocks. In this comparison, we will explore the key factors that differentiate McDonald's and Walmart stocks and assess which may be the better investment option for your portfolio.

McDonald's or Walmart?

When comparing McDonald's and Walmart, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between McDonald's and Walmart.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. McDonald's has a dividend yield of 2.81%, while Walmart has a dividend yield of 0.95%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. McDonald's reports a 5-year dividend growth of 8.26% year and a payout ratio of 58.34%. On the other hand, Walmart reports a 5-year dividend growth of 1.85% year and a payout ratio of 41.18%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with McDonald's P/E ratio at 25.97 and Walmart's P/E ratio at 44.22. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. McDonald's P/B ratio is -41.35 while Walmart's P/B ratio is 8.15.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, McDonald's has seen a 5-year revenue growth of 0.30%, while Walmart's is 0.34%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with McDonald's's ROE at -168.78% and Walmart's ROE at 18.91%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $295.22 for McDonald's and $84.77 for Walmart. Over the past year, McDonald's's prices ranged from $243.53 to $317.90, with a yearly change of 30.54%. Walmart's prices fluctuated between $49.85 and $85.79, with a yearly change of 72.11%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.