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 (
-- 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 and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by 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 1.1%. Since the same quarter one year prior, revenues slightly increased by 1.0%. 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.
- 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 $476.00 million or 1.92% when compared to the same quarter last year. In addition, YUM BRANDS INC has also modestly surpassed the industry average cash flow growth rate of 1.46%.
- YUM BRANDS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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 8.6% in earnings ($3.08 versus $3.37).
- The gross profit margin for YUM BRANDS INC is currently lower than what is desirable, coming in at 31.40%. Regardless of YUM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.11% trails the industry average.
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. Yum has a market cap of $28.9 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 19.00, above the S&P 500 P/E ratio of 18.00. Shares are up 3.4% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
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