Is It Too Late To Consider Buying Yum! Brands, Inc. (NYSE:YUM)?

Yum! Brands, Inc. (NYSE:YUM) saw a decent share price growth of 17% on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading around its 52-week high. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an 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 the opportunity still exists.

View our latest analysis for Yum! Brands

What's The Opportunity In Yum! Brands?

Yum! Brands appears to be overvalued by 21% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$144 on the market compared to our intrinsic value of $118.80. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Yum! Brands’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Yum! Brands?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Yum! Brands' earnings over the next few years are expected to increase by 33%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in YUM’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe YUM should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on YUM for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for YUM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Yum! Brands at this point in time. Our analysis shows 3 warning signs for Yum! Brands (2 are concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Yum! Brands, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.