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Yum China (YUMC) Soars to 52-Week High, Time to Cash Out?
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Have you been paying attention to shares of Yum China Holdings (YUMC - Free Report) ? Shares have been on the move with the stock up 8.8% over the past month. The stock hit a new 52-week high of $52 in the previous session. Yum China Holdings has gained 21.3% since the start of the year compared to the 26.8% move for the Zacks Retail-Wholesale sector and the 7.2% return for the Zacks Retail - Restaurants industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 4, 2024, Yum China reported EPS of $0.77 versus consensus estimate of $0.68.
For the current fiscal year, Yum China is expected to post earnings of $2.31 per share on $11.42 billion in revenues. This represents a 15.5% change in EPS on a 4.01% change in revenues. For the next fiscal year, the company is expected to earn $2.58 per share on $12.37 billion in revenues. This represents a year-over-year change of 11.55% and 8.34%, respectively.
Valuation Metrics
Yum China may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Yum China has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 22.3X current fiscal year EPS estimates, which is not in-line with the peer industry average of 24.3X. On a trailing cash flow basis, the stock currently trades at 16.4X versus its peer group's average of 11.8X. Additionally, the stock has a PEG ratio of 1.84. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Yum China currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Yum China fits the bill. Thus, it seems as though Yum China shares could have a bit more room to run in the near term.
How Does YUMC Stack Up to the Competition?
Shares of YUMC have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Brinker International, Inc. (EAT - Free Report) . EAT has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of C.
Earnings were strong last quarter. Brinker International, Inc. beat our consensus estimate by 37.68%, and for the current fiscal year, EAT is expected to post earnings of $5.43 per share on revenue of $4.77 billion.
Shares of Brinker International, Inc. have gained 34.2% over the past month, and currently trade at a forward P/E of 20.39X and a P/CF of 13.75X.
The Retail - Restaurants industry is in the top 30% of all the industries we have in our universe, so it looks like there are some nice tailwinds for YUMC and EAT, even beyond their own solid fundamental situation.
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Yum China (YUMC) Soars to 52-Week High, Time to Cash Out?
Have you been paying attention to shares of Yum China Holdings (YUMC - Free Report) ? Shares have been on the move with the stock up 8.8% over the past month. The stock hit a new 52-week high of $52 in the previous session. Yum China Holdings has gained 21.3% since the start of the year compared to the 26.8% move for the Zacks Retail-Wholesale sector and the 7.2% return for the Zacks Retail - Restaurants industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 4, 2024, Yum China reported EPS of $0.77 versus consensus estimate of $0.68.
For the current fiscal year, Yum China is expected to post earnings of $2.31 per share on $11.42 billion in revenues. This represents a 15.5% change in EPS on a 4.01% change in revenues. For the next fiscal year, the company is expected to earn $2.58 per share on $12.37 billion in revenues. This represents a year-over-year change of 11.55% and 8.34%, respectively.
Valuation Metrics
Yum China may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Yum China has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 22.3X current fiscal year EPS estimates, which is not in-line with the peer industry average of 24.3X. On a trailing cash flow basis, the stock currently trades at 16.4X versus its peer group's average of 11.8X. Additionally, the stock has a PEG ratio of 1.84. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Yum China currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Yum China fits the bill. Thus, it seems as though Yum China shares could have a bit more room to run in the near term.
How Does YUMC Stack Up to the Competition?
Shares of YUMC have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Brinker International, Inc. (EAT - Free Report) . EAT has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of C.
Earnings were strong last quarter. Brinker International, Inc. beat our consensus estimate by 37.68%, and for the current fiscal year, EAT is expected to post earnings of $5.43 per share on revenue of $4.77 billion.
Shares of Brinker International, Inc. have gained 34.2% over the past month, and currently trade at a forward P/E of 20.39X and a P/CF of 13.75X.
The Retail - Restaurants industry is in the top 30% of all the industries we have in our universe, so it looks like there are some nice tailwinds for YUMC and EAT, even beyond their own solid fundamental situation.