P/E - 24.76
BETA - 0.86
P/CF - 21.81
MARKET CAP - $28.08B
- An increase in the cost of employee wages, benefits and insurance on their mass workforce of 450,000 employees as well as other operating costs such as rent and energy costs have led to significant pressure on the company’s margins. A struggling yet competitive retail environment also puts pressure on the restaurants’ costs. Moreover, with continuous/relentless expansion and the high costs mentioned previously the company is prone to face profit margin pressure.
- Yum! Brands’ trailing 12-month return on equity (ROE) undercuts its growth potential. The company’s ROE of negative 17.7% compares unfavourably with the ROE of 16.8% for the industry, reflecting the fact that it is not that efficient in using shareholders’ funds. Cash flow wise as shown above, it trades 21.81x its cash flow and earnings wise it is trading nearly 25x.
- Yum! Brands’ global sales might be under pressure in the coming quarters, this is due to a slowdown in some of the international markets that it operates in. The company is highly exposed to various nations including emerging markets, which have been exhibiting decelerating growth for quite some time due to various macro headwinds. This might limit discretionary spending.
- Yum! Brands operates in the retail restaurant space that is highly dependent on consumer discretionary spending. Consumers’ propensity to spend largely depends on the overall macro-economic scenario. Although higher disposable income and increased wages are favouring the industry right now, it can change with the slightest disruption in any economy. The company, therefore, is highly vulnerable to the inconsistency of consumer discretionary spending. If it does not make pragmatic use of advanced technologies to innovate across it's value chains, it has a high chance of fading out like many other restaurant retailers.
NeroTree Capital rates Yum! Brands as a SELL with a price target of $73 over a 52w period.
BETA - 0.86
P/CF - 21.81
MARKET CAP - $28.08B
- An increase in the cost of employee wages, benefits and insurance on their mass workforce of 450,000 employees as well as other operating costs such as rent and energy costs have led to significant pressure on the company’s margins. A struggling yet competitive retail environment also puts pressure on the restaurants’ costs. Moreover, with continuous/relentless expansion and the high costs mentioned previously the company is prone to face profit margin pressure.
- Yum! Brands’ trailing 12-month return on equity (ROE) undercuts its growth potential. The company’s ROE of negative 17.7% compares unfavourably with the ROE of 16.8% for the industry, reflecting the fact that it is not that efficient in using shareholders’ funds. Cash flow wise as shown above, it trades 21.81x its cash flow and earnings wise it is trading nearly 25x.
- Yum! Brands’ global sales might be under pressure in the coming quarters, this is due to a slowdown in some of the international markets that it operates in. The company is highly exposed to various nations including emerging markets, which have been exhibiting decelerating growth for quite some time due to various macro headwinds. This might limit discretionary spending.
- Yum! Brands operates in the retail restaurant space that is highly dependent on consumer discretionary spending. Consumers’ propensity to spend largely depends on the overall macro-economic scenario. Although higher disposable income and increased wages are favouring the industry right now, it can change with the slightest disruption in any economy. The company, therefore, is highly vulnerable to the inconsistency of consumer discretionary spending. If it does not make pragmatic use of advanced technologies to innovate across it's value chains, it has a high chance of fading out like many other restaurant retailers.
NeroTree Capital rates Yum! Brands as a SELL with a price target of $73 over a 52w period.