Valuation multiple

Investors’ expectation that the Fed could cut interest rates this year and optimism surrounding the company’s initiatives have led to an increase of 3.9% in Yum! Brands’ (YUM) stock price, which in turn has raised its valuation multiple. As of June 6, the company was trading at a forward PE multiple of 27.1x compared to 25.7x before the announcement of its first-quarter earnings. In comparison, on the same day, peers Domino’s Pizza (DPZ) and Papa John’s (PZZA) were trading at a forward PE multiple of 28.6x and 36.7x, respectively.

Also, YUM was trading at 28.3 times analysts’ 2019 EPS estimate of $3.83 and 25.5 times analysts’ 2020 EPS estimate of $4.25 with its EPS expected to rise by 20.7% in 2019 and 11.0% in 2020.

How Does Yum! Brands’ Valuation Multiple Compare with Its Peers?

Analysts’ recommendations

Since Yum! Brands posted its first-quarter earnings, UBS, Citigroup, BTIG, J. P. Morgan, Bernstein, Jefferies, and Stifel have all raised their price targets.

  • UBS from $105 to $112
  • Citigroup from $103 to $105
  • BTIG from $102 to $114
  • P. Morgan from$94 to $97
  • Bernstein from $105 to $1117
  • Jefferies from $85 to $93
  • Stifel from $94 to $100

However, BMO has lowered its price target from $100 to $98.

Analysts are favoring a “hold” rating for the stock. 59.1% of the 22 analysts that are covering Yum! Brands have given it a “hold” rating, while 36.4% are in favor of a “buy” rating, and 4.5% are in favor of a “sell” rating. Analysts have given YUM a 12-month price target of $104.76, which implies a fall of 3.4% from its stock price of $108.42.

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