Course 405: Classic-Growth Stocks
Conclusion: Quality versus Price
In this course
1 Introduction
2 How Fast Has It Been Growing?
3 What Are the Trends in Growth Rates?
4 Where Is Growth Coming From?
5 Is Profitability Keeping Pace with Growth?
6 What Is the Company Doing with Its Profits?
7 Is the Company's Debt Leverage Increasing?
8 How Has the Stock Performed?
9 How Do the Stock's Price Valuations Compare with Those of Similar Firms?
10 Conclusion: Quality versus Price

A price tag on the high side even relative to other classic-growth stocks doesn't automatically mean investors should pass on McDonald's. You would, however, want to consider McDonald's business in light of the price. Is it strong enough to be worth the higher risk implied by the stock's price multiples? McDonald's growth has been consistent, though slower in recent years. The company has managed its growth well, maintaining the return on investors' capital. McDonald's major growth catalyst, its overseas business, is no flash in the pan: It already accounts for more than half of total sales. McDonald's formidable brand name shouldn't be left out of consideration, either. It's difficult to assign a value to a brand name, but the recognizability of the golden arches has undoubtedly been a big factor in the company's success. Many classic-growth stocks have very recognizable brand names, which contribute to their value. On the other hand, a diehard value investor may conclude that McDonald's isn't obviously undervalued and therefore isn't a desirable investment. Neither answer is right nor wrong, because once you've weighed the business against the price, the final decision is whether the stock fits your investment style and risk tolerance.

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