NYSE · Consumer Cyclical
$155.18 at scoring
$156.38 +0.77% since scoring
A royalty machine with a hollowed-out balance sheet.
Yum is not a restaurant company. It is a global franchise royalty stream wearing three iconic brands, converting 31.5% of revenue into operating profit and $1.6B into free cash. The score reveals the trade-off: elite margins and cash conversion sit on top of negative book equity, the residue of years of leveraged buybacks. The open question is whether Western QSR demand holds as GLP-1 drugs reshape eating habits and as Pizza Hut keeps losing relevance.
14 dimensions, scored on the fundamentals.
Methodology v1Balance Sheet
Negative book value and inverted debt-to-equity reflect aggressive buybacks funded by leverage, leaving the balance sheet thin despite reliable cash generation.
Cash Flow
$1.6B in free cash flow on a franchise-heavy model converts revenue into cash with minimal reinvestment drag.
Revenue Growth
8.8% YoY growth accelerates from a 3-4% baseline, showing real unit expansion and pricing flow-through.
Operating Margins
31.5% operating margin is elite for restaurants, the hallmark of a royalty-collecting franchisor rather than an operator.
Scalability
Roughly 98% franchised means new units are funded by partners while Yum collects fees with near-zero marginal cost.
Economic Moat
Three top-ten global QSR brands and 53,000+ outlets create distribution scale and brand recall few rivals can replicate.
Pricing Power
Franchisees pass through inflation, but value-menu positioning at KFC and Pizza Hut caps how aggressively prices can move.
Innovation
Taco Bell drives genuine menu velocity, but Pizza Hut and KFC innovate at the pace of legacy incumbents.
Leadership
CEO David Gibbs runs a disciplined franchise-led model, though the bench lacks founder-level conviction.
Capital Allocation
Heavy buybacks have driven equity negative; the cash return is real, but timing and leverage discipline are questionable.
Secular Trend
Global QSR grows with emerging-market urbanization, but Western fast food faces health and GLP-1 headwinds.
Geopolitical Risk
157-country footprint diversifies exposure, though China, Russia exits, and Middle East boycotts of Western brands cut both ways.
Customer Concentration
Tens of millions of daily transactions across thousands of franchisees mean no single customer matters.
Valuation Risk
24.8x earnings with a 1.07 PEG is reasonable for a franchise compounder generating this margin profile.
One stock. One sentence. Then the work behind it.
Yum is not a restaurant company. It is a global franchise royalty stream wearing three iconic brands, converting 31.5% of revenue into operating profit and $1.6B into free cash. The score reveals the trade-off: elite margins and cash conversion sit on top of negative book equity, the residue of years of leveraged buybacks. The open question is whether Western QSR demand holds as GLP-1 drugs reshape eating habits and as Pizza Hut keeps losing relevance.
Great economics. Borrowed balance sheet. Watch the unit count, not the multiple.