Critical Comparison: Yum China (YUMC) vs. The Competition

Yum China (NYSE: YUMC) is one of 24 public companies in the “Quick Service Restaurants” industry, but how does it compare to its rivals? We will compare Yum China to related companies based on the strength of its profitability, analyst recommendations, institutional ownership, valuation, risk, dividends and earnings.

Dividends

Yum China pays an annual dividend of $0.10 per share and has a dividend yield of 0.2%. Yum China pays out 6.6% of its earnings in the form of a dividend. As a group, “Quick Service Restaurants” companies pay a dividend yield of 1.5% and pay out 44.3% of their earnings in the form of a dividend.

Insider & Institutional Ownership

86.6% of Yum China shares are held by institutional investors. Comparatively, 80.8% of shares of all “Quick Service Restaurants” companies are held by institutional investors. 0.2% of Yum China shares are held by insiders. Comparatively, 15.6% of shares of all “Quick Service Restaurants” companies are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations for Yum China and its rivals, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Yum China 0 3 8 0 2.73
Yum China Competitors 261 1416 1726 81 2.47

Yum China currently has a consensus target price of $44.41, indicating a potential upside of 9.68%. As a group, “Quick Service Restaurants” companies have a potential upside of 11.68%. Given Yum China’s rivals higher probable upside, analysts clearly believe Yum China has less favorable growth aspects than its rivals.

Profitability

This table compares Yum China and its rivals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Yum China 8.43% 21.35% 14.21%
Yum China Competitors 6.63% 13.77% 9.28%

Valuation & Earnings

This table compares Yum China and its rivals top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Net Income Price/Earnings Ratio
Yum China $6.75 billion $502.00 million 26.81
Yum China Competitors $3.20 billion $441.82 million 447.12

Yum China has higher revenue and earnings than its rivals. Yum China is trading at a lower price-to-earnings ratio than its rivals, indicating that it is currently more affordable than other companies in its industry.

Summary

Yum China beats its rivals on 9 of the 14 factors compared.

Yum China Company Profile

Yum China Holdings, Inc. is a restaurant company. The Company’s segments include KFC, Pizza Hut Casual Dining, and All Other Segments, including Pizza Hut Home Service, East Dawning, Little Sheep and Taco Bell. As of December 31, 2016, the Company had over 7,500 restaurants in China. Its restaurant base consists of various restaurant concepts. The Company’s restaurants in each of its concept offer consumers the ability to dine in and/or carry out food. In addition, KFC, Pizza Hut Casual Dining, Pizza Hut Home Service and East Dawning offer delivery service. KFC is the quick-service restaurant (QSR) brand. Pizza Hut Casual Dining is the casual dining restaurant (CDR) brand. As of December 31, 2016, the Company had over 360 Pizza Hut Home Service units in over 50 cities in China. The Little Sheep concept specializes in Hot Pot cooking. East Dawning is a Chinese food QSR brand. Taco Bell is a QSR brand specializing in Mexican-style food.

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