06-11-2020, 11:20 AM
Right now McDonald's carries a total shareholder's deficit on its balance sheet of $9.29 billion, so its price to book ratio is negative. I have never seen a big capped company have such a negative ratio. That means equity holders got nothing if MCD goes bankrupted. Its debt exceeds the value of its assets plus cash.
This is the consequence that traders and buyers are only looking at price to earnings ratio and dividend yields. So MCD management keep borrowing money to pay dividends to keep good yield and keep borrowing money to buy back shares to keep lower P/E ratio. People pay little attention to their increasing debt in the past five years. And when Covid 19 crisis happened, they borrowed more money from the Fed on early March. And I think people will eat much less often at restaurants after Covid 19. MCD will have hard time to pay back their debt because their revenue and earnings will take a big hit in post-Covid19.
Very dangerous and a lot of other stocks will be in the same boat.
This is the consequence that traders and buyers are only looking at price to earnings ratio and dividend yields. So MCD management keep borrowing money to pay dividends to keep good yield and keep borrowing money to buy back shares to keep lower P/E ratio. People pay little attention to their increasing debt in the past five years. And when Covid 19 crisis happened, they borrowed more money from the Fed on early March. And I think people will eat much less often at restaurants after Covid 19. MCD will have hard time to pay back their debt because their revenue and earnings will take a big hit in post-Covid19.
Very dangerous and a lot of other stocks will be in the same boat.