While large-cap technology stocks outperformed in the primary half of 2024, more defensive names like McDonald’s (NYSE:MCD) stock have gotten left behind. There’s been no fast money from fast food this yr up to now, but perhaps McDonald’s investors can get an excellent value now.

It’s not difficult to discover McDonald’s best post-pandemic enemy: food-price inflation. Anyone who didn’t devour fast food for a number of years after which recently ordered a Big Mac might need suffered from sticker shock.

Amid this difficult backdrop, McDonald’s must be proactive in getting frustrated customers within the door. While the fast-food giant can’t control beef and chicken prices, perhaps it may possibly at the very least manage its image and meet budget-conscious consumers halfway.

Customers ask: Where’s the meat?

Certainly one of McDonald’s more interesting experiments was its partnership with Beyond Meat (NASDAQ:BYND). Together, the 2 corporations brought McDonald’s customers the McPlant burger.

That menu offering might sound great in theory, but during a time of persistent food-price inflation, it’s often cheaper to eat real meat than fake meat. Even beyond the pricing differential, McDonald’s U.S. customers might simply not be as enamored of healthy fast-food options than their European counterparts.

Joe Erlinger, McDonald’s U.S. chief, observed that a test of the McPlant burger in San Francisco and Dallas “was not successful in either market.”

While McDonald’s asserts that plant-based food offerings have fared higher in European markets, Erlinger reported that U.S. consumers aren’t on the lookout for “McPlant or other plant-based proteins from McDonald’s.”

Again, price is paramount during these difficult times for struggling families.

“A few of it’s driven by affordability… Chicken is cheaper to supply, and so for a consumer that’s on the lookout for more cost-effective food, chicken is an excellent option at once,” Erlinger acknowledged.

That’s one pricey burger

In case you haven’t noticed, one thing McDonald’s restaurants generally haven’t done is bring their food items back to pre-COVID-19-pandemic levels.

Based on Erlinger (via The Wall Street Journal), the “average price of a Big Mac sandwich has increased 21% to $5.29 from 2019 level prices,” and a “10-piece McNuggets Meal costs around $9.19, up 28%” since 2019.

Furthermore, while I can’t confirm this, I believe that there could also be some “shrink-flation” occurring in McDonald’s food portions. In any case, McDonald’s has unfortunately abandoned its popular dollar menu and replaced it with $5 value meals, which can or may not refill a mean adult.

The $5 meal offerings could be too little, too late for low-income customers. As of May 2024, the common price of food eaten away from home increased 30% since May of 2019.

Then again, the $5 McDonald’s meals could be just what the doctor ordered. A web based survey from May found that over “one-third of standard fast-food consumers said they’d hunt down the McDonald’s $5 meal,” The Wall Street Journal reported.

July’s results can be a proving ground for McDonald’s $5 value meal experiment. Evercore ISI analyst David Palmer sees July as a “pivotal month for the fast food industry” in determining whether the “$5 meal bundle is sufficient to speed up industry sales.”

Thus, McDonald’s investors should keep a detailed eye on this yr’s summertime sales trends. Ultimately, it won’t be the $5 value meals themselves that can likely profit McDonald’s long-term, but slightly, the repeat visits afterward.

“You’re not being profitable on the worth menu. You’re making menu money on the opposite products, the more premium products, the dessert products, the beverage products that go together with that,” explained R. J. Hottovy, head of analytical research at Placer.ai, to Yahoo! Finance.

Is McDonald’s stock really an excellent value?

A few of us might enjoy a $5 value meal, however the billion-dollar query is whether or not McDonald’s stock is an excellent value at once. Income investors can definitely feast on McDonald’s 2.5% forward annual dividend yield, but bargain hunters could also be hungry for a summertime dip-buying opportunity with MCD stock.

Because it seems, McDonald’s has a GAAP-measured, trailing 12-month price-to-earnings (P/E) ratio of 21.64, which is somewhat higher than the sector median P/E ratio of 17.72.

When you’re on the lookout for something more consistent with the median, you then might consider Wendy’s (NASDAQ:WEN), which has a P/E ratio of 17.27. McDonald’s

Consequently, investors might decide to wait for McDonald’s stock to drop somewhat more before considering a share position. Together with that, it’s clever to attend and see whether McDonald’s $5 value meals bring delectable repeat business or only leave a nasty taste in the purchasers’ mouths.