Restaurant Brands International (NYSE:QSR) and Yum China (NYSE:YUMC) are both large-cap retail/wholesale companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, earnings, analyst recommendations, dividends and profitability.
Analyst Ratings
This is a breakdown of recent ratings and target prices for Restaurant Brands International and Yum China, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Restaurant Brands International | 1 | 6 | 18 | 0 | 2.68 |
Yum China | 0 | 2 | 6 | 1 | 2.89 |
Restaurant Brands International presently has a consensus target price of $65.1818, suggesting a potential upside of 4.98%. Yum China has a consensus target price of $57.6750, suggesting a potential downside of 3.62%. Given Restaurant Brands International's higher probable upside, analysts plainly believe Restaurant Brands International is more favorable than Yum China.
Profitability
This table compares Restaurant Brands International and Yum China's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Restaurant Brands International | 11.00% | 26.67% | 4.70% |
Yum China | 6.33% | 16.35% | 7.65% |
Earnings and Valuation
This table compares Restaurant Brands International and Yum China's gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Restaurant Brands International | $5.60 billion | 3.36 | $643 million | $2.72 | 22.68 |
Yum China | $8.78 billion | 2.84 | $713 million | $1.88 | 31.61 |
Yum China has higher revenue and earnings than Restaurant Brands International. Restaurant Brands International is trading at a lower price-to-earnings ratio than Yum China, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Restaurant Brands International has a beta of 1.19, suggesting that its stock price is 19% more volatile than the S&P 500. Comparatively, Yum China has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500.
Dividends
Restaurant Brands International pays an annual dividend of $2.08 per share and has a dividend yield of 3.4%. Yum China pays an annual dividend of $0.24 per share and has a dividend yield of 0.4%. Restaurant Brands International pays out 76.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Yum China pays out 12.8% of its earnings in the form of a dividend. Restaurant Brands International has raised its dividend for 6 consecutive years and Yum China has raised its dividend for 1 consecutive years. Restaurant Brands International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
79.5% of Restaurant Brands International shares are held by institutional investors. Comparatively, 81.6% of Yum China shares are held by institutional investors. 3.7% of Restaurant Brands International shares are held by company insiders. Comparatively, 0.5% of Yum China shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Summary
Restaurant Brands International beats Yum China on 10 of the 18 factors compared between the two stocks.