McDonald's (MCD -0.84%) and its golden arches are known the world over. There are nuances to the menu, depending on the country in which you find a McDonald's restaurant, but broadly speaking, every location is pretty much the same. That consistency is part of the draw and it has helped the chain generate success for several decades now.

McDonald's shareholders have benefited from this success over the years, with many good years and occasional bad ones as the company adjusts to a changing economy. That has investors wondering what to do with the stock of this iconic fast food chain now. Is it a buy, sell, or a hold?

The case for selling McDonald's stock

The reason why you might want to sell or not buy McDonald's is the easiest argument to explain right now. To sum it up, the company isn't exactly performing well, management is basically warning that its core customers are under some financial strain, and the stock price is, at best, reasonably priced, historically speaking.

Unless financial performance suddenly ticks higher, it seems like there's more downside risk than upside potential right now. But some numbers will help explain all of this.

Image source: Getty Images.

In the fourth quarter of 2024, same-store sales, a measure that shows how well stores open at least a year are performing, jumped a tiny 0.4% across McDonald's global store footprint. The U.S. business, arguably its most important, saw same-store sales fall a troubling 1.4%. These are not impressive numbers, hinting that McDonald's isn't exactly knocking it out of the park today.

The store-level performance backs up against management's third-quarter 2024 comment that, "We will stay laser-focused on providing an unparalleled experience with simple, everyday value and affordability that our consumers can count on as they continue to be mindful about their spending." That was the very first thing that CEO Chris Kempczinski said in the company's third-quarter earnings release, kind of setting the stage for a weak fourth quarter. While the company tried to accentuate the positives in the fourth-quarter earnings release, it is clear that McDonald's is facing near-term headwinds.

And then you have to look at McDonald's valuation. You might be able to justify buying despite the bad news if the stock were on the deep-value rack. But the price-to-sales ratio is above its five-year average, while the price-to-earnings ratio is a bit below its long-term average.

The stock price, meanwhile, rallied on its fourth-quarter results, presumably because they weren't as bad as expected. The shares now trade within 5% of their all-time high, which was reached in mid-2024. Note that the shares have seen 25% or greater drawdowns multiple times over the past few decades, suggesting that McDonald's is nowhere near on sale right now.

Data by YCharts.

Taking profits or, if you don't own it, not buying it seems like a pretty logical decision here.

The case for holding McDonald's stock

What if you do own McDonald's and you happen to like the company's business? Well, it isn't cheap today, but selling it might not make sense for you. It doesn't seem like the stock is massively overpriced (based on the mixed P/E and P/S ratio signals), and the business, like all businesses, is bound to go through both good and bad periods.

The fact that it is facing some difficulties right now isn't a sign that McDonald's has permanently lost its way. Indeed, given the statements about its core customers dealing with financial constraints, you could argue that McDonald's is actually performing reasonably well during a difficult period.

There's nothing wrong with sticking it out with a generally well-run company if you think in decades and not days. Investing for the long term inherently means you'll have to sit out periods of business weakness. Recognize that McDonald's size probably means slow and steady growth is the best you can expect.

But also note that the stock is likely to become a Dividend King very soon (the annual streak of dividend increases is at 49 years), so it clearly has a good business model and places a high value on returning value to investors via regular dividend increases. And the dividend yield is 2.4%, which is roughly twice what you'd get from the S&P 500.

Sticking it out with McDonald's probably isn't the worst investment decision you could make -- as long as you recognize that a sizable drawdown, at some point, is highly likely.

The case for buying McDonald's stock

The decision to buy McDonald's stock is a bit trickier. As noted, the shares aren't exactly cheap, and recent business performance hasn't been great. The outlook isn't exactly impressive either, since McDonald's core customers appear to be facing financial constraints, and that's clearly showing up in the same-store sales figures.

Given that the stock has experienced numerous pullbacks of 25% or more over the past 40 years, there is probably going to be a better time to buy at some point in the future. Unless you expect a sudden turnaround in the business outlook and the company's financial performance, you probably shouldn't buy in today.

McDonald's is a tough company to buy today

The buy thesis is probably the weakest when it comes to McDonald's stock. But differentiating between sell and hold isn't an easy call. The business environment seems to be getting more difficult for this giant restaurant chain, but that's kind of how things go from time to time.

If you are a long-term investor, you'll need to have a thick enough skin to stick out such periods. That said, not buying McDonald's might be the easiest choice here. It isn't hitting on all cylinders, the company has a downbeat outlook regarding its core customers, and the price isn't all that cheap.