How is yum! Brands’ earnings ratio (NYSE: YUM) compared to its industry after the decline?

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To the annoyance of some shareholders, Yum! Brands (NYSE: YUM) stocks fell a remarkable 30% last month. Indeed, the recent decline may have led to some bitterness in shareholders who survived the 34% decline over twelve months. “Data-reactid =” 28 “> To the annoyance of some shareholders Yum! Brands (NYSE: YUM) stocks fell a remarkable 30% last month. Indeed, the recent decline has made shareholders who have survived the 34% decline over twelve months somewhat bitter.

Assuming that nothing else has changed, a lower share price makes a share more attractive to potential buyers. While market sentiment is very volatile about a stock, in the long run the stock price will tend to move in the same direction as earnings per share. In certain cases, long-term focused investors try to use pessimistic expectations to buy stocks at a better price. Perhaps the easiest way to determine what investors expect from a company is the price-to-profit (PE) ratio. A high P / E ratio means that, compared to a company with a low P / E ratio, investors have high expectations of what a company can achieve.

<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Check out our latest analysis for Yum! Brands “data-reactid =” 30 “> Check out our latest analysis for Yum! Brands

How is yum! Brands’ earnings ratio compared to his colleagues?

From the P / E ratio of 15.62 it can be deduced that Yum! Brands. The picture below shows that Yum! Brands have a higher P / E ratio than the average (12.0) P / E ratio for companies in the hotel industry.

NYSE: YUM price estimate relative to the market April 3, 2020

NYSE: YUM price estimate relative to the market April 3, 2020

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This means that the market Yum! Brands expects to outperform others Companies in his industry, of course the market expects growth, but it is not guaranteed, so further research is always essential Buy and sell director. “data-reactid =” 45 “> This means that the market expects Yum! Brands to outperform other companies in its industry. The market clearly expects growth, but it is not guaranteed. Further research is therefore always important. I observe often Buy and sell director.

How growth rates affect P / E

The P / E mainly reflects the market expectations regarding profit growth rates. As revenue increases, the ‘E’ increases over time. Even if you pay a high multiple of income now, that multiple will decrease in the future. While a stock can look expensive based on past earnings, it can be cheap based on future earnings.

Yum! Brands shrank earnings per share by 12% last year. However, earnings per share have increased by 13% per year in the past five years.

One restriction: P / E ignores debts and cash in the bank

A disadvantage of using a P / E is that market capitalization is taken into account, but not the balance sheet. This means that neither debts nor cash are taken into account. Theoretically, a company can improve its profits (and get a lower P / E in the future) by investing in growth. That means taking on debt (or spending cash).

Spending on growth could be good or bad a few years later, but the point is that the P / E does not take into account the option (or lack thereof).

Affects Debt Yum! Brands P / E?

Yum! Brands’ net debt is 50% of market capitalization. This is enough debt that you would have to make some adjustments before using the P / E to compare it to a company with net cash.

The conclusion of Yum! The earnings ratio of the brands

Yum! Brands’ P / E ratio is 15.6, which is above the market average (12.5). With a relatively high level of debt and no earnings growth per share over twelve months, the market can safely assume that the company will improve its earnings growth in the future. What can be absolutely certain is that the Yum! Brands last month, with the P / E falling from 22.4 then to 15.6 today. This may be a bad sign for those who prefer to invest with momentum flow, but it can be an opportunity for an opponent.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Investors have the opportunity if the market expects a share are wrong. If the reality for a company is better than expected, you can make money by buying and holding long term free A report on analyst consensus forecasts could help you make a forecast Master move “data-reactid =” 60 “> Investors have the opportunity if market expectations for a stock are wrong. If the reality for a company is better than expected, you can make money by buying and holding over the long term free A report on analyst consensus forecasts could help you make a forecast Master move on this stock.

<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But note: Yum! Brands may not be the best stock to buy. So take a look free List of interesting companies with strong recent earnings growth (and a P / E under 20). “data-reactid =” 61 “> But note: Yum! Brands may not be the best stock to buy. So take a look free List of interesting companies with strong recent earnings growth (and a P / E under 20).

<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If you find an error that warrants a correction, please contact the publisher at [email protected] This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We would like to provide you with a long-term focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality materials. Thank you for reading.“data-reactid =” 62 “>If you find an error that warrants a correction, please contact the publisher at [email protected] This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We would like to provide you with a long-term focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality materials. Thank you for reading.

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