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, solid stock price performance, growth in earnings per share and good cash flow from operations. 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:
- YUM's revenue growth has slightly outpaced the industry average of 12.3%. 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.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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 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 ($3.28 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. Despite an increase in cash flow, YUM BRANDS INC's average is still marginally south of the industry average growth rate of 8.26%.
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 19.9, above the average leisure industry P/E ratio of 19.6and above the S&P 500 P/E ratio of 17.7. Yum has a market cap of $28.9 billion and is part of the
industry. Shares are up 7.6% year to date as of the close of trading on Wednesday.
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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.