MCD

McDonald's is a best-in-class franchise compounder. The heavily-franchised, rent-and-royalty model produces a 46.1% operating margin and 31.9% net margin — figures almost no other restaurant operator approaches — and FY2025 was another steady year: revenue $26.9B (+3.7%), operating income $12.4B (+5.8%), net income $8.56B (+4.1%), and diluted EPS $11.95 (+4.9%). Operating cash flow rose 11.7% to $10.6B, comfortably covering $3.37B of capex and the $5.12B dividend. This is a durable, highly profitable cash machine.

Don't be misled by the headline -478% ROE or the -$1.79B stockholders' equity — this is not balance-sheet distress. Retained earnings are actually +$70.3B; the negative book equity is the cumulative artifact of decades of debt-funded buybacks and dividends, a deliberate capital-return strategy common to mature cash generators. The genuine watch-item is leverage: roughly $40.7B of total debt ($40.0B long-term + $725M current) against just $774M of cash (down 28.7%), with a current ratio just under 1 (current assets $4.16B vs liabilities $4.36B). The predictable $10.6B of operating cash flow makes this serviceable, but it leaves little cushion for a serious demand shock, and the dividend and buyback both ride on uninterrupted cash generation.