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McDonald's Corp  (NYSE:MCD) E10: \$5.42 (As of Sep. 2017)

E10 is a concept invented by Prof. Robert Shiller, who uses E10 for his Shiller P/E calculation. E10 is the average of the inflation adjusted earnings of a company over the past 10 years.

McDonald's Corp's adjusted earnings per share data for the three months ended in Sep. 2017 was \$2.320. Add all the adjusted EPS for the past 10 years together and divide 10 will get our e10, which is \$5.42 for the trailing ten years ended in Sep. 2017.

As of today, McDonald's Corp's current stock price is \$166.72. McDonald's Corp's E10 for the quarter that ended in Sep. 2017 was \$5.42. McDonald's Corp's Shiller PE Ratio of today is 30.76.

During the past 13 years, the highest Shiller PE Ratio of McDonald's Corp was 34.92. The lowest was 21.02. And the median was 27.15.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

McDonald's Corp Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 E10 3.53 4.01 4.26 4.54 4.83

McDonald's Corp Quarterly Data

 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 E10 4.81 4.83 4.95 5.24 5.42

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.

Calculation

E10 is a concept invented by Prof. Robert Shiller, who uses E10 for his Shiller P/E calculation. When we calculate the today's Shiller P/E ratio of a stock, we use todays price divided by E10.

What is E10? How do we calculate E10?

E10 is the average of the inflation adjusted earnings of a company over the past 10 years. Let's use an example to explain.

If we want to calculate the E10 of Wal-Mart (WMT) for Dec. 31, 2010, we need to have the inflation data and the earnings from 2001 through 2010.

We adjusted the earnings of 2001 earnings data with the total inflation from 2001 through 2010 to the equivalent earnings in 2010. If the total inflation from 2001 to 2010 is 40%, and Wal-Mart earned \$1 a share in 2001, then the 2001's equivalent earnings in 2010 is \$1.4 a share. If Wal-Mart earns \$1 again in 2002, and the total inflation from 2002 through 2010 is 35%, then the equivalent 2002 earnings in 2010 is \$1.35. So on and so forth, you get the equivalent earnings of past 10 years. Then you add them together and divided the sum by 10 to get E10.

For example, McDonald's Corp's adjusted earnings per share data for the three months ended in Sep. 2017 was:

 Adj_EPS = Earnings per Share (Diluted) / CPI of Sep. 2017 (Change) * Current CPI (Sep. 2017) = 2.32 / 246.819 * 246.819 = 2.320

Current CPI (Sep. 2017) = 246.819.

McDonald's Corp Quarterly Data

 per share eps CPI Adj_EPS 200712 1.060 210.036 1.246 200803 0.810 213.528 0.936 200806 1.040 218.815 1.173 200809 1.050 218.783 1.185 200812 0.870 210.228 1.021 200903 0.870 212.709 1.010 200906 0.980 215.693 1.121 200909 1.150 215.969 1.314 200912 1.110 215.949 1.269 201003 1.000 217.631 1.134 201006 1.130 217.965 1.280 201009 1.290 218.439 1.458 201012 1.160 219.179 1.306 201103 1.150 223.467 1.270 201106 1.350 225.722 1.476 201109 1.450 226.889 1.577 201112 1.330 225.672 1.455 201203 1.230 229.392 1.323 201206 1.320 229.478 1.420 201209 1.430 231.407 1.525 201212 1.380 229.601 1.483 201303 1.260 232.773 1.336 201306 1.380 233.504 1.459 201309 1.520 234.149 1.602 201312 1.390 233.049 1.472 201403 1.210 236.293 1.264 201406 1.400 238.343 1.450 201409 1.090 238.031 1.130 201412 1.130 234.812 1.188 201503 0.840 236.119 0.878 201506 1.260 238.638 1.303 201509 1.400 237.945 1.452 201512 1.310 236.525 1.367 201603 1.250 238.132 1.296 201606 1.250 241.018 1.280 201609 1.500 241.428 1.533 201612 1.430 241.432 1.462 201703 1.470 243.801 1.488 201706 1.700 244.955 1.713 201709 2.320 246.819 2.320

Add all the adjusted EPS together and divide 10 will get our e10.

Explanation

If a company grows much fast than inflation, E10 may underestimate the company's earnings power. Shiller PE Ratio can seem to be too high even the actual P/E is low.

For the Shiller P/E, the earnings of the past 10 years are inflation-adjusted and averaged. The result is used for P/E calculation. Since it looks at the average over the last 10 years, the Shiller P/E is also called PE10.

The Shiller P/E was first used by professor Robert Shiller to measure the valuation of the overall market. The same calculation is applied here to individual companies.

McDonald's Corp's Shiller P/E Ratio of today is calculated as

 Shiller PE Ratio = Share Price / E10 = 166.72 / 5.42 = 30.76

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

During the past 13 years, the highest Shiller P/E Ratio of McDonald's Corp was 34.92. The lowest was 21.02. And the median was 27.15.

Be Aware

Shiller PE Ratio works better for cyclical companies. It gives you a better idea on the company's real earnings power.

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