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Last update on 2024-06-05

Yum Brands (YUM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Piotroski F-Score analysis for Yum Brands (YUM) reveals a stellar 9/9 score for 2023, showcasing robust profitability, liquidity, and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 9

We're running Yum Brands (YUM) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Yum Brands (YUM) has been evaluated using the Piotroski F-Score, which is a rating from 0 to 9 that checks a company's financial health. Yum Brands received a perfect score of 9. This score comes from several areas: Profitability (positive net income of $1.597 billion, positive cash flow from operations of $1.603 billion, increased return on assets, and higher operating cash flow than net income); Liquidity (higher current ratio of 1.26, reducing number of shares outstanding); and Operating Efficiency (slightly higher gross margin and asset turnover ratio). Even though there was an increase in debt, the overall evaluation shows Yum Brands has excellent financial health and good management.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Yum Brands (YUM) appears to be a strong candidate for investment, especially for those looking to invest in stable and profitable companies. The perfect Piotroski F-Score of 9 indicates Yum Brands is not only financially healthy but also efficient in its operations. Investors looking for a company with good profitability, solid cash flow, and effective asset utilization should consider Yum Brands as it shows promising signs of strength and sustainability.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Yum Brands (YUM)

Company has a positive net income?

Net Income is a crucial criterion as it reflects the company's profitability. Positive net income indicates financial health and efficiency in operations.

Historical Net Income of Yum Brands (YUM)

For Yum Brands (YUM), the net income for 2023 is $1,597,000,000. This trend indicates financial robustness, marking a positive outcome. Even though net income saw small variances, the overall trajectory remains solid. Adding 1 point for positive net income conforms to its ability to generate consistent profit over the years.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion checks whether the cash flow generated from operating activities is positive.

Historical Operating Cash Flow of Yum Brands (YUM)

Yum Brands (YUM) reported a positive Cash Flow from Operations (CFO) of $1,603,000,000 in 2023. This indicates a robust operational performance and generates 1 point according to the Piotroski Analysis. Over the past 20 years, YUM's CFO has demonstrated steadiness, rarely dipping below $1 billion, except in a few years like 2017 and 2018. The consistent positive CFO signals the company's ability to generate ample cash from its primary business activities, crucial for maintaining liquidity and funding growth without relying excessively on external financing.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) evaluates the efficiency of a company in generating profit from its assets. A higher ROA indicates enhanced performance.

Historical change in Return on Assets (ROA) of Yum Brands (YUM)

For Yum Brands (YUM), the ROA has increased from 0.2243 in 2022 to 0.2645 in 2023. Consequently, Yum Brands earns 1 point for this criterion. This is a positive trend as it indicates improved efficiency in asset utilization, leading to higher profitability. Notably, Yum Brands' ROA in 2023 surpasses the industry median ROA of 0.3206. This consistent increase signifies a robust performance. Over the last 20 years, high years of 5 recorded higher than 0.3 which marks an exceptional year as compared to the competition. This upward trend is reassuring to investors looking for returns.

Operating Cashflow are higher than Netincome?

Criterion that checks whether operating cash flow is higher than net income

Historical accruals of Yum Brands (YUM)

Based on the provided data for the year 2023, Yum Brands (YUM) exhibits an operating cash flow of $1,603,000,000, which is indeed higher than its net income of $1,597,000,000. Therefore, one point is awarded for this criterion under the Piotroski Analysis framework. This is a positive indicator as it suggests that the company is generating more cash from its core operations than its reported net earnings, which enhances liquidity and might signal better management of its operational cash cycle. Historically, Yum Brands has a fluctuating operating cash flow; reaching a peak in 2012 at $2,294,000,000 and a low in 2017 at $1,030,000,000. Their net income has also had variances, peaking in 2016 at $1,619,000,000, and saw a significant downturn in 2019 hitting $904,000,000. The accruals over the last 20 years show a generally increasing trend. Hence, in the context of solid cash flows compared with net income and stable accruals, Yum Brands presents a relatively healthy operational standing.

Liquidity of Yum Brands (YUM)

Leverage is declining?

Change in Leverage compares the debt levels of a company year-over-year to determine its financial risk.

Historical leverage of Yum Brands (YUM)

The leverage for Yum Brands (YUM) has increased from 2.0842 in 2022 to 1.9096 in 2023, indicating a higher reliance on debt financing. This increase in debt levels raises the financial risk of the company and negatively impacts its financial health. Examining the historical data shows that leverage peaked at 2.361 in 2018, which suggests fluctuating debt levels but a recent uptick. Consequently, Yum Brands does not earn a point for this criterion.

Current Ratio is growing?

The Current Ratio measures the ability of a company to pay short-term obligations with its current assets. It is important because it provides insights into the liquidity and financial health of the company.

Historical Current Ratio of Yum Brands (YUM)

As of 2023, Yum Brands (YUM) has a Current Ratio of 1.26, an increase from 0.9664 in 2022. This represents an improvement in the company's liquidity position, suggesting that Yum Brands is better equipped to cover its short-term liabilities with its short-term assets. The increase earns the company 1 point for this criterion. Comparing historical data, Yum's ratio has often been below the industry median, but the latest figure suggests enhanced financial stability and could positively impact investor confidence.

Number of shares not diluted?

This criterion evaluates the change in the number of outstanding shares of a company over time. It is important because a decrease in outstanding shares indicates share buybacks, which often signal management's confidence in the firm's future prospects.

Historical outstanding shares of Yum Brands (YUM)

Comparing Yum Brands' outstanding shares of 286 million in 2022 with 281 million in 2023, there is a decrease in outstanding shares by 5 million. This trend is positive and earns a score of 1 point under the Piotroski criteria because it suggests that Yum Brands has been buying back shares. Historically, the number of outstanding shares has steadily decreased over the last 20 years, beginning at approximately 611 million in 2003 and dropping to the current 281 million in 2023. This long-term trend further underscores strong financial health and effective capital management strategies by the company.

Operating of Yum Brands (YUM)

Cross Margin is growing?

The criterion analyzes the year-on-year change in Gross Margin for Yum Brands (YUM) and its significance in profitability assessments.

Historical gross margin of Yum Brands (YUM)

From 2022 to 2023, Yum Brands (YUM) experienced a slight increase in Gross Margin from 0.4833 to 0.4941. This positive trend, although marginal, results in adding 1 point for this criterion, denoting improved efficiency in production relative to the company's revenue generation. Historical data demonstrates a fluctuating gross margin with a noticeable increase post-2016. For comparison, the industry median has hovered around the lower 30% range recently, implying that Yum Brands not only improved but also outperformed the industry norm substantially.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. Higher values indicate better performance.

Historical asset turnover ratio of Yum Brands (YUM)

In 2023, Yum Brands reported an Asset Turnover of 1.1718, marginally up from 1.1585 in 2022. This increase indicates improved efficiency in utilizing its assets to generate revenue. Historical data underscores this positive trend; although a significant dip occurred in 2016 at 0.9394, the company has successfully bounced back, reaching steady growth rates surpassing 1.1 since 2017. This positive movement awards the company 1 point in the Piotroski analysis.


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