McDonald's or Domino's: One of These Is a Screaming Buy Right Now

The restaurant industry has struggled over the past year due to a variety of factors. One of the most notable is inflation, which has led to higher costs for restaurants and higher prices for customers. And those issues have led to less traffic and reduced revenue.

Now, not all restaurants are equal, and some have performed better than others, particularly within the realm of fast-food restaurant stocks.

McDonald's (NYSE: MCD), for example, had a solid 2025. In the fourth quarter (ended Dec. 31, 2025), revenue jumped 10% year over year, and same-store sales rose 5.7% globally and 6.8% in the U.S. Certainly, its lower-priced offerings were more of a draw for budget-conscious consumers.

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Still, McDonald's stock underperformed the broader market in 2025, returning about 5.4%. This year, the stock has largely treaded water, up around 0.5%.

McDonald's stock still looks like a solid option for 2026, but there is one fast-food stock that I like better, Domino's (NASDAQ: DPZ), the leading pizza chain.

Domino's ready to rebound

Domino's stock underperformed in 2025, down about 1% and off roughly 11% so far in 2026. But Domino's looks better positioned for growth in 2026 with its lower valuation, improving financials, and strong position in the market.

While many fast-food restaurants saw declining traffic, Domino's increased its same-store sales by 3.7% in the fourth quarter and 3% for the full year. In that sense, it joined McDonald's as one of the relatively few to boost traffic. Revenue also increased by roughly 6% in Q4 and 5% for the full year.

One of the reasons Domino's stock price is down this year is the chain saw a 5.4 percentage point reduction in its gross margin for stores it owns to 10.1% this past quarter. It should be noted that it only owns about 260 stores; the rest of the 7,000-plus are owned by franchisees.

However, Domino's increased its supply chain gross margin slightly by 0.1 percentage points to 11.4% and called for improving margins in its outlook for 2026. The supply chain gross margin includes the food and supplies it sends to its stores.

Growing its market share

In 2026, Domino's calls for an improvement in its overall operating margin, as well as a 3% increase in same-store sales, according to the Q4 earnings call. In addition, global sales are anticipated to rise 6% while operating income could climb 8% in 2026.

Also, like McDonald's, Domino's will benefit from its low-cost offerings in a stagnant economy, as pizza is even cheaper to feed a family. Plus, Domino's is growing its leading market position among pizza chains as it now owns a more than 30% market share. On the earnings call, CEO Russell Weiner said the chain can double its retail sales in the U.S., targeting a 40% to 50% market share that other fast-food industry leaders have.

It is probably worth noting that Berkshire Hathaway owns Domino's stock, so the company has caught the attention of Warren Buffett.

Along with these factors, what really sets Domino's up for a rebound is its low valuation. It is trading at just 18 times forward earnings, lower than McDonald's. It has a median price target that suggests 33% upside.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Domino's Pizza. The Motley Fool has a disclosure policy.