NEW YORK (
-- Yum Brands
) 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, expanding profit margins, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- YUM's revenue growth has slightly outpaced the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 13.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- YUM BRANDS INC reported significant earnings per share improvement 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 ($3.32 versus $2.74).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 73.5% when compared to the same quarter one year prior, rising from $264.00 million to $458.00 million.
- 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.
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 21.2, above the average leisure industry P/E ratio of 21and above the S&P 500 P/E ratio of 17.7. Yum has a market cap of $30.5 billion and is part of the
industry. Shares are up 10.2% year to date as of the close of trading on Thursday.
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--Written by a member of TheStreet Ratings Staff.
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.