Is this a sign that McDonald’s stock has peaked?

Over the past few years, McDonald’s (MCD 0.37%) We were able to achieve strong performance even amid inflation. The fast food restaurant giant has been growing despite difficult economic times. In fact, we raised our prices without much impact on sales.

But as inflation continues to be a problem, investors and analysts have warned that it may only be a matter of time before consumers begin to rebel against higher prices. And according to the company’s most recent quarterly results, demand may actually be slowing.

Recent results have been disappointing

On April 30, McDonald’s announced its first quarter results for the first three months of the year. Revenue of $6.17 billion topped analyst expectations of $6.15 billion, but adjusted earnings per share of $2.70 were slightly below Wall Street’s target of $2.72.

However, what is even more concerning is that the same-store sales growth rate, a key indicator of the restaurant industry, was only 1.9%. A year ago, same-store sales were up a whopping 12.6%. The company cited a “difficult macro environment” as the cause of the difficulties, with consumers now more price sensitive than in the past.

The company is still reporting its 13th consecutive quarter of comparable sales growth, but the biggest concern is whether growth rates will decline further in the future. Raising prices was a key part of McDonald’s strategy and a way to increase the company’s numbers. However, it may not be possible to do so without affecting overall demand.

Stock prices are harder to justify.

Slowing growth is a cause for concern for McDonald’s stock because investors may be willing to pay a discount rather than a premium for McDonald’s stock. The stock price has fallen since the earnings results were released, and the stock is trading at a price-to-earnings multiple of 23. S&P 500 average.

McDonald’s shares traded at record highs earlier this year, but warning signs have emerged that the company’s performance could worsen as investors become concerned about macroeconomic conditions, including the boycott of Israel as well as inflation. And last week’s U.S. jobs report showed fewer jobs were added than expected, which could further fuel concerns about the state of the domestic economy as a recession could be just around the corner.

McDonald’s stock may not be technically overvalued, but its low-single-digit growth rate could result in it posting a lower earnings multiple than it has in the past to compensate for the less impressive numbers.

Is McDonald’s stock still worth buying?

McDonald’s is an excellent stock to own for the long term, especially for dividend investors. A dividend yielding 2.5% is still safe, and the company will likely bounce back and its growth rate will return over the long term. McDonald’s plans to continue expanding during what it calls its “fastest growth period” in history, bringing its number of restaurants to 50,000 by 2027 (it currently has more than 40,000).

The latest results highlight difficult times for the company, but that doesn’t mean the business is doomed for any reason. Investors should temper their expectations for the stock this year as there are a number of factors that could potentially negatively impact its operations. This could make the stock price difficult and limit short-term gains. But as long as you’re willing to hold the stock for many years, McDonald’s can still be a great investment.