Financial QA - Extractive

Using the diluted earnings per share (EPS) from FY2022 and the stock price based on the average price paid per share from November 1-30, 2022, calculate the P/E ratio for FY2022. Round answer to two decimal places. Explain the answer and point me to the evidence.

Calculation:

The P/E ratio is calculated as follows:

P/E Ratio = Stock Price / Earnings Per Share

P/E Ratio = $270.40 / $8.33

P/E Ratio = 32.47

Explanation:

The Price-to-Earnings (P/E) ratio is a valuation metric that compares a company's current stock price to its earnings per share. It indicates how much investors are willing to pay for each dollar of a company's earnings.

For McDonald's in fiscal year 2022:

• Diluted earnings per share (EPS) were $8.33.
• The average stock price in November 2022 was $270.40.

Therefore, a P/E ratio of 32.47 signifies that investors were willing to pay approximately $32.47 for every dollar of McDonald's earnings during FY2022.

Evidence:

• Diluted EPS (FY2022): Found on Page 11 of the provided document, within the "Consolidated Statement of Income" section, under the line item "Earnings per common share-diluted" for the year ended December 31, 2022.
• Average Price Paid Per Share (November 2022): Located on Page 26 of the provided document, within the "ISSUER PURCHASES OF EQUITY SECURITIES" table, specifically for the period "November 1-30, 2022", under the column "Average Price Paid per Share".