Target price

On February 2, 2018, Yum! Brands (YUM) was trading at $82.63. On the same day, analysts expected its stock price to reach $85.40, which represents a return potential of 3.4%.

The strong 3Q17 earnings and improving same-store sales growth appears to have encouraged analysts to raise their target prices. On February 2, 2018, RBC raised its target price from $89 to $92. Barclays increased its target price from $79 to $84, and Oppenheimer increased its target price from $85 to $90. On January 30, 2018, Nomura had downgraded the stock from “buy” to “neutral.”

What Analysts Recommend for Yum! Brands before Its 4Q17 Earnings

The target prices and return potential of Yum! Brands’ peers follow:

  • Domino’s Pizza (DPZ): target price of $229.25 with a return potential of 6.9%
  • Papa John’s (PZZA): target price of $69.00 with a return potential of 12.8%

Analysts’ estimates

Of the 26 analysts that follow Yum! Brands, 42.3% recommend a “buy,” 57.7% recommend a “hold,” and none of the analysts recommend a “sell.”

Yum! Brands is trading below analysts’ 12-month target price. However, this doesn’t mean an automatic buy. Investors should study analysts’ estimates discussed in this series before making any investment decisions.

Valuation multiple

On February 2, 2018, Yum! Brands was trading at 26.6x, and its peers Domino’s Pizza and Papa John’s were trading at 27.1x and 21.0x, respectively.

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