Yum Brands: Valuation Appears Stretched

Aug. 13, 2024 2:22 AM ETYum! Brands, Inc. (YUM) StockMCD, YUM
Florian Muller
581 Followers
(10min)

Summary

  • Past per-share performance was largely driven by debt-funded share buybacks.
  • This led to today's high leverage of YUM.
  • With KFC, Taco Bell, and Pizza Hut, Yum operates high-margin franchises.
  • Valuation appears stretched, particularly in peer comparisons with market leader McDonald's and others.
  • I see no reason to choose YUM over McDonald's, for example.

KFC Fast-Food-Restaurant in Spijkenisse, Niederlande

Bjoern Wylezich/iStock Editorial via Getty Images

Thesis Overview

Driven by the sharp selloff of nearly 20% in McDonald's (MCD) stock from January through early summer, I issued a Buy rating on the company at $250 on a German platform. Since then, the stock

This article was written by

581 Followers
Excellent academic Finance background and Finance professional with over five years of cumulative experience in Consulting & Audit Firms including a professional Valuation position, FP&A and Controlling positions, and Financial writing. I often rate hold/neutral, even when my inclination is bullish or bearish. Rating systems do not consider time horizons or investment strategies. My articles aim to inform, not to make decisions. My approach is mostly value-oriented. However, valuation is rarely an appropriate short- to mid-term timing indicator, but rather hints at long-term chances or risks. In my pieces, I assign the written word and data presented more value than a simple rating.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of MCD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

About YUM Stock

SymbolLast Price% Chg
Market Cap
PE
Yield
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on YUM

Related Stocks

SymbolLast Price% Chg
YUM
--