129K Reasons To Be Bullish On Yum China Holdings Stock

On August 15, a substantial insider purchase was made by Joey Wat, Chief Executive Officer at Yum China Holdings YUMC, as per the latest SEC filing.

What Happened: In a Form 4 filing on Thursday with the U.S. Securities and Exchange Commission, it was disclosed that Wat bought 3,800 shares of Yum China Holdings, amounting to a total of $129,109.

As of Thursday morning, Yum China Holdings shares are up by 1.14%, currently priced at $33.58.

Discovering Yum China Holdings: A Closer Look

With almost 13,000 units and USD 10 billion in systemwide sales in 2022, Yum China is the largest restaurant chain in China. It generates revenue through its own restaurants and franchise fees. Key concepts include KFC (9,094 units) and Pizza Hut (2,903), but the company's portfolio also includes other brands such as Little Sheep, East Dawning, Taco Bell, Huang Ji Huang, COFFii & Joy, and Lavazza (collectively representing about 950 units). Yum China is a trademark licensee of Yum Brands, paying 3% of total systemwide sales to the company it separated from in October 2016.

Key Indicators: Yum China Holdings's Financial Health

Positive Revenue Trend: Examining Yum China Holdings's financials over 3 months reveals a positive narrative. The company achieved a noteworthy revenue growth rate of 0.94% as of 30 June, 2024, showcasing a substantial increase in top-line earnings. As compared to its peers, the revenue growth lags behind its industry peers. The company achieved a growth rate lower than the average among peers in Consumer Discretionary sector.

Holistic Profitability Examination:

• Gross Margin: The company issues a cost efficiency warning with a low gross margin of 16.46%, indicating potential difficulties in maintaining profitability compared to its peers.

• Earnings per Share (EPS): Yum China Holdings's EPS outshines the industry average, indicating a strong bottom-line trend with a current EPS of 0.55.

Debt Management: Yum China Holdings's debt-to-equity ratio is below industry norms, indicating a sound financial structure with a ratio of 0.47.

Understanding Financial Valuation:

• Price to Earnings (P/E) Ratio: The P/E ratio of 15.96 is lower than the industry average, implying a discounted valuation for Yum China Holdings's stock.

• Price to Sales (P/S) Ratio: The current P/S ratio of 1.22 is below industry norms, suggesting potential undervaluation and presenting an investment opportunity for those considering sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): The company's EV/EBITDA ratio 8.35 is below the industry average, indicating that it may be relatively undervalued compared to peers.

Market Capitalization Highlights: Above the industry average, the company's market capitalization signifies a significant scale, indicating strong confidence and market prominence.

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Delving Into the Significance of Insider Transactions

Insider transactions should be considered alongside other factors when making investment decisions, as they can offer important insights.

Within the legal framework, an "insider" is defined as any officer, director, or beneficial owner holding more than ten percent of a company's equity securities as per Section 12 of the Securities Exchange Act of 1934. This includes executives in the c-suite and major hedge funds. These insiders are mandated to disclose their transactions through a Form 4 filing, to be submitted within two business days of the transaction.

The initiation of a new purchase by a company insider serves as a strong indication that they expect the stock to rise.

However, insider sells may not always signal a bearish view and can be influenced by various factors.

Deciphering Transaction Codes in Insider Filings

For investors, a primary focus lies on transactions occurring in the open market, as indicated in Table I of the Form 4 filing. A P in Box 3 denotes a purchase, while S signifies a sale. Transaction code C signals the conversion of an option, and transaction code A denotes a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of Yum China Holdings's Insider Trades.

This article was generated by Benzinga's automated content engine and reviewed by an editor.