McDonald's (MCD -0.91%) is a solid, dependable stock to own. But investors don't often think of it as much of a growth stock. While it offers a good dividend, this is not the type of investment people come to expect high returns from these days.
But the company has recently released some promising growth targets, which could mean some significant growth for the business. Here's a closer look at those plans, and why the stock could be a great buy not just for next year but for the long term.
50,000 restaurants by 2027
On Dec. 6, fast-food restaurant giant McDonald's unveiled some exciting growth targets for its Accelerating the Arches strategy. One of the biggest targets are plans for it to reach 50,000 restaurants worldwide by 2027. That is 8,802 more restaurants than the 41,198 it reported as of the end of September. That's a significant rate of increase given that the company finished 2017 with just 37,241 restaurants -- it has increased its restaurant count by less than 4,000 since then, which is a span of almost six years. It plans to double that rate over a shorter time frame.
By opening more locations, the company can achieve a higher growth rate than what it has averaged in the past, which could draw in more growth-oriented investors along the way.
MCD Revenue (Quarterly YoY Growth) data by YCharts
McDonald's also doesn't plan to sacrifice profitability either. The company projects that its operating margin will expand, even as it launches new restaurants.
Utilizing more technology
In addition to growing its top line, the company is also making efforts to become more efficient. McDonald's has announced a partnership with Alphabet's Google Cloud, so that it can make use of artificial intelligence (AI) at its restaurants. The end goal is for this to reduce complexity for McDonald's staff while also providing customers with a better experience.
Upgrading and improving its technological capabilities is also important in one of McDonald's other key goals -- growing its loyalty member count from 150 million users to 250 million by 2027.
More users on the McDonald's app will make it easier and more cost-effective for the company to reach those customers. It ties in well with the company's focus on AI, as more loyalty members means more data on the McDonald's app which can be utilized to tailor specific recommendations and promos to users, thereby potentially making it easier to grow sales in the long run.
Investors should be lovin' the stock
Shares of McDonald's are up a fairly modest 9% this year, and the stock trades at a fairly high 25 times earnings -- higher than the S&P 500 average of 20. But given McDonald's focus on both growing sales and improving efficiency through technological improvements and more loyalty members, the company's earnings should look a whole lot better over the next few years as it begins to execute on these ambitious growth plans.
That's why despite the seemingly elevated valuation, McDonald's could be an excellent stock to buy. Not only is the business still growing, but it also offers investors a top dividend which yields 2.3%, and it has been increasing its payouts for decades. Overall, McDonald's is a great stock that could be an ideal investment for any portfolio.
