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

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.