Does The Recent Dip Make Yum Brands Attractive After Global Expansion And Digital Growth News
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Wondering if Yum! Brands at around $143.89 is a tasty opportunity or just fully priced fast food? You are not alone. Let’s unpack what the market is really paying for here.
The stock is down about 3.1% over the last week and 2.9% over the last month, but it is still up 7.7% year to date and 47.0% over five years. This points to a steady long term compounding story rather than a hype driven surge.
Recent headlines have focused on Yum! Brands continued global expansion of its KFC, Taco Bell, and Pizza Hut footprint and ongoing digital ordering and delivery initiatives, which investors see as key to sustaining growth. At the same time, commentary around consumer spending resilience and the relative strength of quick service dining has shaped how the market prices Yum! Brands defensive qualities.
Despite that backdrop, Yum! Brands currently scores just 0/6 on our valuation checks. Next we will look at traditional valuation approaches, then circle back to a more complete way of thinking about what this business is really worth.
Yum! Brands scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and discounting those cash flows back to their value in $ today.
For Yum! Brands, the model starts with last twelve months Free Cash Flow of about $1.58 billion, then uses analyst estimates for the next few years and extrapolates further out. By 2029, Free Cash Flow is projected to be around $2.30 billion, with additional incremental growth assumed through 2035, based on a 2 Stage Free Cash Flow to Equity framework provided by Simply Wall St.
When those future cash flows are discounted back, the model arrives at an estimated intrinsic value of $118.61 per share, versus the current share price around $143.89. This implies the stock is roughly 21.3% overvalued on a DCF basis, and it also suggests that a substantial portion of expected future growth may already be reflected in the current price.
For a mature, consistently profitable business like Yum! Brands, the Price to Earnings (PE) ratio is a practical way to gauge valuation, because it links what investors pay today directly to the company’s current earning power.
In general, higher growth and lower risk justify a higher PE ratio, while slower growth or greater uncertainty should translate into a lower, more conservative multiple. Yum! Brands currently trades on a PE of about 27.6x, which sits above both the Hospitality industry average of roughly 23.6x and the peer average of around 22.9x, indicating that the market is already assigning it a quality premium.
Simply Wall St’s proprietary Fair Ratio for Yum! Brands is 26.3x. This measure goes beyond simple peer or industry comparisons by adjusting for the company’s specific earnings growth outlook, profit margins, risk profile, industry positioning and market cap. Because it blends these fundamentals into one benchmark, it is a more tailored yardstick than a broad-brush sector average. With the actual PE only modestly above the 26.3x Fair Ratio, Yum! Brands appears slightly expensive but broadly in line with what its fundamentals warrant.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple tool on Simply Wall St’s Community page that lets you attach your story about Yum! Brands to the numbers by connecting your assumptions for future revenue, earnings and margins to a financial forecast, a Fair Value estimate and a clear view of how that Fair Value compares with today’s share price. All of this then updates dynamically as new news or earnings arrive. For example, one investor might build a Yum! Brands Narrative that assumes rapid Taco Bell led growth, margin expansion and a Fair Value closer to $186. A more cautious investor could focus on risks around Pizza Hut, cost pressures and slower comparable sales and land nearer $142, with both perspectives fully quantified and tracked over time in an accessible, story driven framework.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include YUM.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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