Critical Comparison: McDonald’s (NYSE:MCD) versus Portillo’s (NASDAQ:PTLO)

McDonald’s (NYSE:MCD) and Portillo’s (NASDAQ:PTLO) are both retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, valuation, profitability, institutional ownership, analyst recommendations, risk and dividends.

Insider & Institutional Ownership

70.3% of McDonald’s shares are held by institutional investors. Comparatively, 98.3% of Portillo’s shares are held by institutional investors. 0.3% of McDonald’s shares are held by insiders. Comparatively, 6.1% of Portillo’s shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares McDonald’s and Portillo’s”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
McDonald’s	$25.92 billion	8.48	$8.22 billion	$11.67	26.39
Portillo’s	$727.75 million	0.61	$29.52 million	$0.45	13.11

McDonald’s has higher revenue and earnings than Portillo’s. Portillo’s is trading at a lower price-to-earnings ratio than McDonald’s, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares McDonald’s and Portillo’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
McDonald’s	32.21%	-225.52%	15.07%
Portillo’s	4.19%	6.25%	2.03%

Volatility and Risk

McDonald’s has a beta of 0.5, meaning that its share price is 50% less volatile than the S&P 500. Comparatively, Portillo’s has a beta of 1.75, meaning that its share price is 75% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for McDonald’s and Portillo’s, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
McDonald’s	2	15	11	0	2.32
Portillo’s	1	7	4	0	2.25

McDonald’s presently has a consensus target price of $324.68, indicating a potential upside of 5.41%. Portillo’s has a consensus target price of $10.28, indicating a potential upside of 74.20%. Given Portillo’s’ higher probable upside, analysts plainly believe Portillo’s is more favorable than McDonald’s.

Summary

McDonald’s beats Portillo’s on 9 of the 14 factors compared between the two stocks.

About McDonald’s

McDonald’s Corp. engages in the operation and franchising of restaurants. It operates through the following segments: U.S., International Operated Markets, and International Developmental Licensed Markets and Corporate. The U.S. segment focuses its operations on the United States. The International Operated Markets segment consists of operations and the franchising of restaurants in Australia, Canada, France, Germany, Italy, the Netherlands, Spain, and the U.K. The International Developmental Licensed Markets and Corporate segment consists of developmental licensee and affiliate markets in the McDonald’s system. The firm’s products include Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, McDonald’s Fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafe beverages, and other beverages. The company was founded by Raymond Albert Kroc on April 15, 1955, and is headquartered in Oak Brook, IL.

About Portillo’s

Portillo’s Inc. owns and operates fast casual restaurants in the United States. The company offers Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut French fries, homemade chocolate cakes, and chocolate cake shake. It offers its products through its website, application, and certain third-party platforms. Portillo’s Inc. was founded in 1963 and is based in Oak Brook, Illinois.