If You Like EPS Growth Then Check Out Yum! Brands (NYSE:YUM) Before It's Too Late

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Yum! Brands (NYSE:YUM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Yum! Brands

How Fast Is Yum! Brands Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Yum! Brands grew its EPS by 4.5% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Yum! Brands's EBIT margins were flat over the last year, revenue grew by a solid 16% to US$6.6b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Yum! Brands?

Are Yum! Brands Insiders Aligned With All Shareholders?

Since Yum! Brands has a market capitalization of US$35b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. To be specific, they have US$37m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Yum! Brands Deserve A Spot On Your Watchlist?

One positive for Yum! Brands is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. It is worth noting though that we have found 3 warning signs for Yum! Brands (2 are a bit concerning!) that you need to take into consideration.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.