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Today's Momo Momentum Stock To Watch: Yum Brands (YUM)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Yum Brands (YUM) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Yum Brands as such a stock due to the following factors:

  • YUM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $266.9 million.
  • YUM has a PE ratio of 30.0.
  • YUM is currently in the upper 30% of its 1-year range.
  • YUM is in the upper 25% of its 20-day range.
  • YUM is in the upper 35% of its 5-day range.
  • YUM is currently trading above yesterday's high.
  • YUM has experienced a gap between today's open and yesterday's close of 0.2%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in YUM with the Ticky from Trade-Ideas. See the FREE profile for YUM NOW at Trade-Ideas

More details on YUM:

YUM! Brands, Inc., together with its subsidiaries, operates quick service restaurants in the United States and internationally. It operates in six segments: YUM Restaurants China, YUM Restaurants International, Taco Bell U.S., KFC U.S., Pizza Hut U.S., and YUM Restaurants India. The stock currently has a dividend yield of 2.1%. YUM has a PE ratio of 30.0. Currently there are 7 analysts that rate Yum Brands a buy, no analysts rate it a sell, and 15 rate it a hold.

The average volume for Yum Brands has been 3.3 million shares per day over the past 30 days. Yum has a market cap of $31.9 billion and is part of the services sector and leisure industry. The stock has a beta of 0.47 and a short float of 1.8% with 2.25 days to cover. Shares are up 7.7% year to date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Yum Brands as a buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • YUM, with its decline in revenue, slightly underperformed the industry average of 0.8%. Since the same quarter one year prior, revenues slightly dropped by 2.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. 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.
  • YUM BRANDS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, YUM BRANDS INC increased its bottom line by earning $3.37 versus $2.74 in the prior year. For the next year, the market is expecting a contraction of 13.9% in earnings ($2.90 versus $3.37).
  • Net operating cash flow has declined marginally to $824.00 million or 7.82% when compared to the same quarter last year. Despite a decrease in cash flow of 7.82%, YUM BRANDS INC is in line with the industry average cash flow growth rate of -17.35%.
  • The gross profit margin for YUM BRANDS INC is currently lower than what is desirable, coming in at 33.15%. YUM has continued with the weak profit margin when compared to the same quarter of last year. Despite the mixed results of the gross profit margin, YUM's net profit margin of 4.38% is significantly lower than the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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