Friday 3 May 2013

Analysis of Yum! Brands

An American fastfood conglomerate

Company: Yum! Brands

Business: Fast food chain with Kentucky Fried Chicken, Pizza Hut and Taco Bell.

Active: Very well established in North America, a little in Europe and are stepping heavily into China especially with KFC.

P/E: 18.9

The running P/E is almost 19 which depending on the type of company can be high. The price to book is very high with its 14 and that gives according to Graham the result that one should currently not invest in Yum Brands. The earnings per sale is around 13% which means better than Starbucks but much worse than McDonalds. The book to debt is also not very impressive for an American company. The growth as calculated for the last five years has been 3.8% which is above inflation but not much more. This gives according to Lynch a motivated P/E of 13 and 16 according to Graham. This means that with their current P/E of 19  it is not the good moment to step in as shareholder. The dividends are below 2% and it represents 35% of the earnings. I personally wants a slightly higher percentage in dividends but without a changed %-age of earnings meaning the stock price must decrease. They have good solid earnings and the last couple of years they have bought back shares.

Conclusion: Another one of those excellent American companies that are excellent to invest in but currently are slightly too expensive for being of interest.

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