McDonald’s (MCD) shares are trading around $311 per share after a recent rebound from their November and December lows. Based on free cash flow valuation, their fair value is estimated at around $371, implying upside potential of about 19%.

The company is generating strong free cash flow: over the past 12 months FCF has amounted to around $7.4 billion, and the forecast for next year points to up to $9 billion at a high margin. Using a 29.4x multiple, this implies a potential market capitalization of about $265 billion versus the current $222 billion, indicating a significant undervaluation.

The market is gradually pricing in this potential: according to various services, the average analyst price targets are already in the $331–352 per share range and have increased moderately over the past month. This supports the view that McDonald’s current share price still lags behind its estimated fair value.

Investors can use options strategies to benefit from this potential. Selling out-of-the-money put options allows them to collect premium and lower the entry point, while buying in-the-money call options with a strike around $300 and a longer expiry enhances participation in the upside. This combination makes it possible to earn option premiums and increase potential returns as the share price moves toward target levels.