McDonald's Corp (NYSE:MCD) stock has fallen to four-year lows. A former hedge fund manager says the valuation of the stock looks good at current levels and calls shares "undervalued." Here's why.

Sizing Up McDonald's Stock

Former hedge fund manager Whitney Tilson recently took a look at McDonald's stock and compared the current valuation and thesis to when he looked at the stock back in June.

"With the stock down another 14% since then, might it now be an especially good buying opportunity?" Tilson asks in a newsletter.

Tilson highlights several strengths of McDonald's, including boosted margins through franchising, free cash flow doubling since 2018 and strong shareholder returns through share buybacks and a 3%+ dividend yield.

"Over the past two decades, revenues have barely moved. But that's mostly because McDonald's has franchised many company-owned units, which reduces capital intensity and boosts profits."

McDonald's growth has slowed in recent quarters, which may be contributing to the declining stock price. Tilson highlights global comparable sales being up 5.7% in the fourth quarter of 2025, up 3.8% in the first quarter of 2026 and up 1.3% in the second quarter of 2026. The market expert says this is what makes McDonald's a "slow-growing cash cow."

"McDonald's is an excellent business, with high margins and robust FCF."

Tilson doesn't ignore the challenge of restaurant stocks from weight-loss drugs, but sees the valuation of McDonald's stock too cheap to ignore.

"McDonald's trades at 17.6 times consensus analysts' estimates for next year. That's slightly below its historical average price-to-earnings of 19.7 times over the past quarter century."

Tilson called McDonald's stock fairly valued back in June. He reaches a different conclusion this time.

"Today, I think it's moderately undervalued."

Tilson's History with McDonald's Stock

Tilson previously owned McDonald's stock in late 2002, a position that he admits he later "backed up the truck" for by adding more shares in early 2003 when they were under $13.

At one time in 2003, the stock was around 10% of Tilson's hedge fund.

"It was the biggest win of my early investing career," Tilson said.

The investor recalls shares doubling two years after 2003.

In a five-year time period, Tilson watched McDonald's shares go from under $13 to the mid-$60s.

He later sold the stock during the bear market in 2008, recalling that McDonald's was one of only two stocks in the Dow Jones Industrial Average that were positive that year, with Walmart being the other.

Tilson said this ended up being a mistake.

"I should have 'let my winners run' – the key to long-term investment success, as I've written many time."

McDonald's stock hit $200 by 2019 and $300 by 2024, before peaking at $341.75 in March 2026.

Time will tell if Tilson is right about McDonald's stock again, but the fact that shares trade at four-year lows does offer an interesting entry point for investors.