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Watch For Today's Momo Momentum Stock: 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 $218.4 million.
  • YUM has a PE ratio of 31.8.
  • 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 2.4%.

'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%. YUM has a PE ratio of 31.8. Currently there are 11 analysts that rate Yum Brands a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Yum Brands has been 3.4 million shares per day over the past 30 days. Yum has a market cap of $32.8 billion and is part of the services sector and leisure industry. The stock has a beta of 0.72 and a short float of 1.9% with 3.11 days to cover. Shares are down 0.3% year-to-date as of the close of trading on Monday.

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. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • YUM's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 0.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $586.00 million or 23.10% 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 -32.46%.
  • YUM BRANDS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, YUM BRANDS INC reported lower earnings of $2.36 versus $3.37 in the prior year. This year, the market expects an improvement in earnings ($3.60 versus $2.36).
  • In its most recent trading session, YUM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 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.

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