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McDonald (NYSE:MCD) stock has struggled in 2018, but now the shares have gotten too cheap. After McDonald’s had a big 2017, stock still down 5.7% from year high .

The selloff comes even as estimates are on the rise, and historically buying stock when it's at a discount to the market and its peers has been a successful strategy.

McDonald's has been a laggard this year, that the pessimism is overdone and yet while the stock been sideway range trading most of 2018, McDonald's earnings estimates have actually been on the rise, with fiscal 2018 consensus estimates climbing 9% form the end of last year.

Moreover, the stock looks too cheap, with relative multiples below the market and its rivals, a level that's historically signaled a good time to buy the stock. A 15% dividend increase means that its payout is even juicier, and the risk-reward is attractive. 

The Analyst

Guggenheim's Matthew DiFrisco upgraded McDonald's from Neutral to Buy with a new $200 price target.

The Reasons

Shares of McDonald's are trading near 15.6 times Guggenheim's estimate, which is a 33 percent discount from its peers.

This "unjustifiable" valuation gap to its peers has existed for the past five years at a time when it was a lower franchise mixed company. McDonald's is on track to hit its long-term 95 percent franchise mix target. 

Meanwhile, McDonald's management continues to deploy its "Experience of the Future"(EOTF) technological overhaul, which the analyst said is found at around one-third of stores globally.

As part of the modernization effort, the company should see continued incremental customer visits and higher average checks. Assuming a full EOTF implementation in the future, global sales lifts should be in the mid-single digit range and U.S. same-store sales should become a net tailwind in the first half of 2019.

Investors should consider being buyers of fast food giant McDonald's Corp 

Price Action

Shares of McDonald closed at $168.29 on Wednesday.

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