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.

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 $269.5 million.
  • YUM has a PE ratio of 34.3.
  • 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 0.9%.

'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.

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More details on YUM:

YUM! Brands, Inc., together with its subsidiaries, operates quick service restaurants. It operates in five segments: YUM China, YUM India, the KFC Division, the Pizza Hut Division, and the Taco Bell Division. The stock currently has a dividend yield of 2.1%. YUM has a PE ratio of 34.3. Currently there are 7 analysts that rate Yum Brands a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Yum Brands has been 3.5 million shares per day over the past 30 days. Yum has a market cap of $34.5 billion and is part of the services sector and leisure industry. The stock has a beta of 0.97 and a short float of 1.2% with 1.58 days to cover. Shares are up 9.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Yum Brands as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.2%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for YUM BRANDS INC is currently lower than what is desirable, coming in at 29.92%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.15% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $437.00 million or 25.42% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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