In This Article:
Let's talk about the popular Yum! Brands, Inc. (NYSE:YUM). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$139 at one point, and dropping to the lows of US$123. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Yum! Brands' current trading price of US$126 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Yum! Brands’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Yum! Brands
Is Yum! Brands Still Cheap?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 4.9% below our intrinsic value, which means if you buy Yum! Brands today, you’d be paying a fair price for it. And if you believe the company’s true value is $132.77, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Yum! Brands’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Yum! Brands?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 28% over the next couple of years, the future seems bright for Yum! Brands. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in YUM’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on YUM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.