3/26/2012
Yum! Brands Inc (NYSE:YUM)
KFC, Pizza hut, and Taco Bell are killing it, especially over seas... but this looks really frothy to me. With over 30% improvement in EPS last quarter year over year traders flocked to this stock, so we probably missed the basic boat on this one. Might it live up to the hype in the next 5 years? 10? 30? How long are we talking here? Will this go through the roof if there's a sudden downturn? Will this crash when the market chooses to be irrationally exuberant about something else? The market place in food services is very competitive and capital intensive, is YUM a winner? Well, here's one ass hole's opinion.
Price at write up 71.44
Valuation Ratios
Price/Earnings (TTM) . . . . . 25.79x
Price/Sales (TTM) . . . . . . . 2.58x
Price/Book (MRQ) . . . . . . . 17.82x
Price/Cash Flow (TTM) . . . . 16.57
Held by institutions . . . . . . 72.68
MarketCap
Benjamim . . . . . . . . 5/5: Shoot for $87.30, it's still cheep, and other than it's debt management looks brilliant.
Patrick . . . . . . . . . . 5/5: China & India look like great for continued growth, US is basically flat or stabilizing. Target ~78.
Davison . . . . . . . . . 3/5: It's run up has been impressive, and it's a strong stock, but margins can fluctuate with food costs. US sames store sales seem to be improving with impressive market share. I just don't like the price, at least 25% over valued.
Thomas . . . . . . . . . 3/5: It's up almost 50% in the past year, missed the boat on this. Fair price around $60.
Marcel . . . . . . . . . .4/5: I don't think it's going to continue it's current rise and we may see a pull back, but not enough to short.
Yum operates KFC, Pizza Hut, Taco Bell, Long John Silver's and A&W, and as Davison said they have impressive market-share. But what brought it to my attention was it's over sea's activity. I've seen how it's doing business and generally approve, the trouble is everyone else has seen the same stuff I have at this point and that's pushed the stock price way too high for me to consider. With it's fair value being around a third of it's current price any general sell off will likely negatively impact this stock significantly, it feels frothy to me, and create a buying opportunity. If you're in it for the next 30 years, well then it doesn't much matter. But at 5-10 years I think you can do better elsewhere, and within 2 I think you certainly can. In fact, for me, the book is way too high, just off that I'd place a check mark in the "Sell if you own" it column. But I don't know that I'd short it, investor confidence is up and they're not delusional just a little too eager. Some would argue that's reason enough to short, but I'm not one of those. Slow growth should continue to come, and depending on capital markets YUM might grow into it's valuation fairly quickly and from a nominal standpoint shorting it may not do you any good.
Due diligence would involve CMG, MCD, PNRA, THI, DRI, CAKE. Notably I feel that IBD has inflated the hell out of Chipotle (CMG), so it's really not worth considering. MickyDs might be worth considering, and they've made some nice inroads in china. Tim Hortons PE is a little high for a food company for me (but due diligence might reveal an impressive growth plan, but I doubt it). Starbucks & Panera's PEs are almost hilarious, but next too Wendy's 99.8 and Chipotle's 61.85 I'm simply left shocked and reaching for the "Short" button in this sector. CAKE and DRI are the only real considerations here, and I'll be investigating them at my earliest convenience.
I'd like it around $53, but I wouldn't pay over $60 and that's where I set my trade alert. If you really want exposure check my suggested due diligence comparisons who knows you might find some short and option possibilities along the way.
Yum! Brands Inc (NYSE:YUM)
KFC, Pizza hut, and Taco Bell are killing it, especially over seas... but this looks really frothy to me. With over 30% improvement in EPS last quarter year over year traders flocked to this stock, so we probably missed the basic boat on this one. Might it live up to the hype in the next 5 years? 10? 30? How long are we talking here? Will this go through the roof if there's a sudden downturn? Will this crash when the market chooses to be irrationally exuberant about something else? The market place in food services is very competitive and capital intensive, is YUM a winner? Well, here's one ass hole's opinion.
Price at write up 71.44
Valuation Ratios
Price/Earnings (TTM) . . . . . 25.79x
Price/Sales (TTM) . . . . . . . 2.58x
Price/Book (MRQ) . . . . . . . 17.82x
Price/Cash Flow (TTM) . . . . 16.57
Held by institutions . . . . . . 72.68
MarketCap
Benjamim . . . . . . . . 5/5: Shoot for $87.30, it's still cheep, and other than it's debt management looks brilliant.
Patrick . . . . . . . . . . 5/5: China & India look like great for continued growth, US is basically flat or stabilizing. Target ~78.
Davison . . . . . . . . . 3/5: It's run up has been impressive, and it's a strong stock, but margins can fluctuate with food costs. US sames store sales seem to be improving with impressive market share. I just don't like the price, at least 25% over valued.
Thomas . . . . . . . . . 3/5: It's up almost 50% in the past year, missed the boat on this. Fair price around $60.
Marcel . . . . . . . . . .4/5: I don't think it's going to continue it's current rise and we may see a pull back, but not enough to short.
Yum operates KFC, Pizza Hut, Taco Bell, Long John Silver's and A&W, and as Davison said they have impressive market-share. But what brought it to my attention was it's over sea's activity. I've seen how it's doing business and generally approve, the trouble is everyone else has seen the same stuff I have at this point and that's pushed the stock price way too high for me to consider. With it's fair value being around a third of it's current price any general sell off will likely negatively impact this stock significantly, it feels frothy to me, and create a buying opportunity. If you're in it for the next 30 years, well then it doesn't much matter. But at 5-10 years I think you can do better elsewhere, and within 2 I think you certainly can. In fact, for me, the book is way too high, just off that I'd place a check mark in the "Sell if you own" it column. But I don't know that I'd short it, investor confidence is up and they're not delusional just a little too eager. Some would argue that's reason enough to short, but I'm not one of those. Slow growth should continue to come, and depending on capital markets YUM might grow into it's valuation fairly quickly and from a nominal standpoint shorting it may not do you any good.
Due diligence would involve CMG, MCD, PNRA, THI, DRI, CAKE. Notably I feel that IBD has inflated the hell out of Chipotle (CMG), so it's really not worth considering. MickyDs might be worth considering, and they've made some nice inroads in china. Tim Hortons PE is a little high for a food company for me (but due diligence might reveal an impressive growth plan, but I doubt it). Starbucks & Panera's PEs are almost hilarious, but next too Wendy's 99.8 and Chipotle's 61.85 I'm simply left shocked and reaching for the "Short" button in this sector. CAKE and DRI are the only real considerations here, and I'll be investigating them at my earliest convenience.
I'd like it around $53, but I wouldn't pay over $60 and that's where I set my trade alert. If you really want exposure check my suggested due diligence comparisons who knows you might find some short and option possibilities along the way.