At today's price, McDonald's stock is pricing in about 10.8% annual free-cash-flow growth for the next ten years. Over the past three years (once a 2022 one-time distortion clears), actual FCF growth averaged 9.4% a year — a modest, not extreme, gap.
At its current price, MCD implies ~10.8% annual FCF growth for the next 10 years, discounted at 9% (using trailing-twelve-month FCF).
McDonald's actual 3-year FCF growth (FY2022→FY2025, after a 2022 distortion clears) has averaged 9.4% a year.
Required growth vs. historical growth
Required growth from the reverse DCF below. The 5-year FCF figure is distorted by a high FY2021 base (post-pandemic recovery peak) followed by one-time Russia-exit costs (~$1.2-1.4B pretax) in FY2022 — the 3-year window (FY2022-2025) more accurately reflects the recent trend. Source: 10-K FY2021-FY2025 cash flow and income statements.
Sensitivity: what if the discount rate moves?
| WACC | Required growth (TTM FCF) |
|---|---|
| 8% | 8.4% |
| 9% (base case, large stable company) | 10.8% |
| 10% | 13.0% |
| 12% | 17.0% |
At a 12% discount rate, the required growth rate jumps to 17.0% — which would flip the read from "close to history" to "the market wants meaningfully more."
What would move this number
- Switching from trailing-twelve-month FCF ($7,761M) to a three-year average ($7,038M) raises the required growth rate from 10.8% to 12.1%.
- A more conservative 12% discount rate pushes the required growth rate to 17.0%.
- Changing the terminal growth rate or the length of the high-growth window (10 years vs. 5) would also shift the answer — see the calculation details below.
Show your work
Inputs, sources, model assumptions, and the calculation
- Share price$266.99 — stockanalysis.com, Aug 18, 2026 close
- Diluted weighted-average shares711.1M — 10-Q Q2 FY2026
- Trailing-twelve-month FCF$7,761M — calculated: FY2025 annual operating cash flow ($10,551M) minus H1 FY2025 ($4,426M) plus H1 FY2026 ($5,222M) = $11,347M; capex similarly = $3,586M; FCF = $11,347M − $3,586M
- Net debt$39,041M — 10-Q Q2 FY2026 balance sheet (Jun 30, 2026): long-term debt $39,863M minus cash $822M
- Discount rate (WACC)9% base case (8%/10%/12% tested) — large stable-company default
- Terminal growth rate2.5% — long-run GDP-level assumption
Normalization check: trailing-twelve-month FCF ($7,761M) is +10.3% above the three-year (FY2023-2025) average ($7,038M) — well within the ±40% threshold, so used as-is without adjustment.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value (market cap + net debt).
The fine print
- Change the discount rate, the FCF base, the projection window, or the terminal growth rate, and the answer moves — see the sensitivity table above.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- McDonald's has twice admitted "it wasn't strategy, it was execution" in the last two years (2024, 2026) — whether that pattern recurs is directly relevant to whether 10.8% growth is achievable, not something this math alone can answer.
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does MCD's stock price assume?
At today's price, McDonald's stock is pricing in about 10.8% annual free-cash-flow growth for the next ten years.
How does that compare to McDonald's actual growth?
Over the past three years (once a 2022 one-time distortion clears), McDonald's actual free-cash-flow growth averaged 9.4% a year — close to the ~10.8% required, a modest rather than extreme gap.
What share price was used for this analysis?
This analysis used $266.99, McDonald's closing price, as of Aug 18, 2026.