If you own or are eyeing McDonald's (MCD) shares, the latest batch of earnings might be the shake-up you were waiting for. The company just posted another quarter of revenue and net income growth, reaffirming its reputation for weathering shifting consumer moods. But here is the twist: McDonald's did not just lean on legacy strengths. From doubling down on artificial intelligence to testing new drinks inspired by its CosMc's concept, management is actively teeing up changes that could reshape how the fast-food giant operates and creates value. Top it off with a hefty round of share buybacks, and there is lots for investors to unpack.

This combination of resilient results and eye-catching innovation comes as the stock has quietly pushed up over 16% in the past year despite a dip over the past three months. Long-term holders have scored solid gains, and recent news, from global AI rollouts to expanded menu tests, has helped renew momentum after a patch of relatively flat performance earlier this summer. The market seems to be reassessing McDonald’s growth story, with shares trading near record highs as confidence in future prospects grows. At least, that is the signal in the current price action.

After another quarter of steady gains and fresh strategic pivots, is McDonald’s offering investors an opportunity to buy into future growth at a fair price, or is the market already factoring in every upside?

Most Popular Narrative: 6.5% Undervalued

According to the most popular community narrative, McDonald’s shares are currently trading at a discount to fair value, with analysts projecting that there is meaningful upside based on forward earnings and revenue potential.

Robust investment and traction in digital commerce, including loyalty program expansion, app-based ordering, geofencing-enabled pickup, and a targeted goal of 250 million active loyalty users by 2027, are expected to increase customer frequency, improve retention, and lift average ticket size. These efforts support both revenue and higher net margins over time.

Curious why analysts see McDonald's trading below its true worth? There is a behind-the-scenes growth story built on ambitious revenue and margin improvement goals, with a future profit multiple that hints at strong confidence in the company’s transformation. If you want to know just how aggressive those expectations are, you’ll want to dig deeper into the numbers driving this narrative.

Result: Fair Value of $329.15 (UNDERVALUED)

However, ongoing declines in low-income traffic or persistent inflation in core inputs could quickly challenge McDonald’s growth assumptions and put pressure on future margins.

Another View: What Does the DCF Model Say?

While analysts see upside in McDonald's fundamentals, the SWS DCF model also points to shares trading below fair value. However, are both methods capturing all the risks and potential rewards, or does one miss the mark?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out McDonald's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own McDonald's Narrative

Feel free to dive into the numbers and piece together your own take. It only takes a few minutes to analyze the data firsthand.

A great starting point for your McDonald's research is 4 key rewards and 2 important warning signs, which could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.