Starbucks vs McDonald's Which Outperforms?

Investors looking for stable and profitable stocks in the food and beverage industry often consider Starbucks and McDonald's. Both companies have a strong global presence and a loyal customer base. While Starbucks is known for its premium coffee and upscale atmosphere, McDonald's attracts customers with its affordability and convenient locations. Investors may choose Starbucks for its emphasis on innovation and customer experience, while McDonald's offers consistent growth and dividend payouts. Ultimately, the decision between Starbucks and McDonald's stocks comes down to individual investment goals and risk tolerance.

Starbucks or McDonald's?

When comparing Starbucks and McDonald's, 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 Starbucks and McDonald's.

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. Starbucks has a dividend yield of 2.38%, while McDonald's has a dividend yield of 2.29%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Starbucks reports a 5-year dividend growth of 10.35% year and a payout ratio of 68.73%. On the other hand, McDonald's reports a 5-year dividend growth of 8.26% year and a payout ratio of 58.34%.

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 Starbucks P/E ratio at 29.46 and McDonald's's P/E ratio at 25.78. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Starbucks P/B ratio is -14.87 while McDonald's's P/B ratio is -41.06.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Starbucks has seen a 5-year revenue growth of 0.75%, while McDonald's's is 0.30%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Starbucks's ROE at -46.35% and McDonald's's ROE at -168.78%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $96.94 for Starbucks and $295.75 for McDonald's. Over the past year, Starbucks's prices ranged from $71.55 to $103.32, with a yearly change of 44.40%. McDonald's's prices fluctuated between $243.53 and $317.90, with a yearly change of 30.54%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.