Yum Brands Inc Stock Buy Recommendation Reiterated (YUM)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Yum Brands (NYSE:YUM) has been reiterated by TheStreet Ratings as a buy with a ratings score of A- . The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

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Highlights from the ratings report include:

• The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
• Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.79% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, YUM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
• YUM BRANDS INC has improved earnings per share by 6.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, YUM BRANDS INC increased its bottom line by earning $2.74 versus $2.39 in the prior year. This year, the market expects an improvement in earnings ($3.27 versus $2.74).
• The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, YUM BRANDS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
• Net operating cash flow has slightly increased to $440.00 million or 6.02% when compared to the same quarter last year. In addition, YUM BRANDS INC has also vastly surpassed the industry average cash flow growth rate of -85.29%.

YUM! Brands, Inc., together with its subsidiaries, operates as a quick service restaurant company in the United States and internationally. The company has a P/E ratio of 21, above the average leisure industry P/E ratio of 20.8 and above the S&P 500 P/E ratio of 17.7. Yum has a market cap of $30.35 billion and is part of the services sector and leisure industry. Shares are up 11.7% year to date as of the close of trading on Wednesday.

You can view the full Yum Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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