Mcdonalds Stock Valuation
12/10/12
BMGT 443
McDonalds Valuation Project Write Up
To begin the economic analysis of McDonalds, we must first look at the company beta. McDonalds has a beta of .34 meaning it is not as volatile when compared to the market and can be categorized as a low risk stock. To determine that financial impact of changes in economic conditions to the performance McDonalds, three economic indicators must be evaluated. The leading economic index (LEI), coincident economic index (CEI), and lagging economic index (LAG), are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component.
The LEI are indicators that change before the economy as a whole changes and is therefore a short-term predictor of the economy. The LEI or the U.S. increased 0.2 percent in October to 96.0, following a 0.5 percent increase in September, and a 0.4 percent decline in August. The LEI has shown improvement and gives a little hope in what can be expected, in terms of the economy, in the next few months. The CEI provides information about the current state of the economy. The CEI for the U.S. increased 0.1 percent in October to 104.8, following a 0.2 percent increase in September, and a 0.4 percent decline in August. From this information, the CEI tells us that the current economy is showing signs of improvement but again, nothing substantial. Lagging indicators tend to lag a quarter or two and change after the economy as a whole does. (LAG) increased 0.3 percent in October to 117.1, following a 0.1 percent decline in September, and a 0.4 percent increase in August. Because employment rate is a lagging indicator, the LAG index can be expected to increase in this slow economy. When analyzing the LEI, CEI, and LAG it can be determined that the economy will expand modestly into 2013, however, the negative effects of hurricane Sandy most likely are not factored into these indicators.
The
BMGT 443
McDonalds Valuation Project Write Up
To begin the economic analysis of McDonalds, we must first look at the company beta. McDonalds has a beta of .34 meaning it is not as volatile when compared to the market and can be categorized as a low risk stock. To determine that financial impact of changes in economic conditions to the performance McDonalds, three economic indicators must be evaluated. The leading economic index (LEI), coincident economic index (CEI), and lagging economic index (LAG), are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component.
The LEI are indicators that change before the economy as a whole changes and is therefore a short-term predictor of the economy. The LEI or the U.S. increased 0.2 percent in October to 96.0, following a 0.5 percent increase in September, and a 0.4 percent decline in August. The LEI has shown improvement and gives a little hope in what can be expected, in terms of the economy, in the next few months. The CEI provides information about the current state of the economy. The CEI for the U.S. increased 0.1 percent in October to 104.8, following a 0.2 percent increase in September, and a 0.4 percent decline in August. From this information, the CEI tells us that the current economy is showing signs of improvement but again, nothing substantial. Lagging indicators tend to lag a quarter or two and change after the economy as a whole does. (LAG) increased 0.3 percent in October to 117.1, following a 0.1 percent decline in September, and a 0.4 percent increase in August. Because employment rate is a lagging indicator, the LAG index can be expected to increase in this slow economy. When analyzing the LEI, CEI, and LAG it can be determined that the economy will expand modestly into 2013, however, the negative effects of hurricane Sandy most likely are not factored into these indicators.
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