Stock Analysis & Valuation Yum! Brands, Inc. (TGR.DE)

• Previous Close: €129.85
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	102.60	-21
Intrinsic value (DCF)	72.94	-44
Graham-Dodd Method		n/a
Graham Formula	65.90	-49

Strategic Investment Analysis

Company Overview

Yum! Brands, Inc. (TGR.DE) is a global leader in the quick-service restaurant (QSR) industry, operating and franchising well-known brands including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. Headquartered in Louisville, Kentucky, Yum! Brands has a vast international footprint with over 53,000 restaurants across 157 countries and territories as of December 2021. The company specializes in diverse food categories such as chicken, pizza, Mexican-style cuisine, and chargrilled burgers, catering to a broad consumer base. Yum! Brands primarily follows a franchise-heavy model, which provides stable royalty income and reduces operational risks. With a market capitalization exceeding €35.7 billion, the company is a dominant player in the consumer cyclical sector, benefiting from strong brand recognition and global expansion. Its diversified portfolio and focus on digital innovation position it well in the competitive QSR landscape.

Investment Summary

Yum! Brands presents a compelling investment case due to its strong global brand portfolio, franchise-driven business model, and consistent cash flow generation. The company's diversified revenue streams across KFC, Pizza Hut, and Taco Bell mitigate risks associated with any single market or brand. With a beta of 0.769, Yum! Brands exhibits lower volatility compared to the broader market, making it a relatively stable investment. However, high total debt (€12.29 billion) and exposure to inflationary pressures on food and labor costs pose risks. The company’s solid dividend yield (€2.63 per share) and robust operating cash flow (€1.69 billion) underscore its financial health, but investors should monitor debt levels and international market performance.

Competitive Analysis

Yum! Brands holds a competitive edge through its globally recognized brands and extensive franchise network, which ensures scalability and reduced capital expenditures. Its multi-brand strategy allows it to capture diverse consumer preferences, from fried chicken (KFC) to Mexican fast food (Taco Bell). The company’s heavy reliance on franchising (98% of units are franchised) provides stable royalty income and minimizes operational risks. However, competition in the QSR space is intense, with rivals like McDonald’s and Restaurant Brands International leveraging similar franchise models and digital innovations. Yum! Brands’ focus on digital ordering and delivery partnerships (e.g., Grubhub, DoorDash) enhances its competitive positioning. While its international presence is a strength, currency fluctuations and geopolitical risks in emerging markets could impact profitability. The acquisition of The Habit Burger Grill diversifies its portfolio but faces stiff competition in the premium burger segment.

Major Competitors

• McDonald's Corporation (MCD): McDonald's is the largest QSR chain globally, with a stronger footprint in breakfast and coffee segments compared to Yum! Brands. Its scale, operational efficiency, and iconic brand give it pricing power. However, McDonald's has less diversification in cuisine types compared to Yum!'s multi-brand approach.
• Restaurant Brands International (QSR): RBI owns Burger King, Tim Hortons, and Popeyes, competing directly with Yum!'s KFC and The Habit Burger Grill. RBI’s strong international growth and cost-saving initiatives are strengths, but its smaller scale in pizza and Mexican food limits direct competition with Pizza Hut and Taco Bell.
• Domino's Pizza, Inc. (DPZ): Domino's is a pure-play pizza chain with superior digital ordering capabilities, posing a threat to Pizza Hut. Its asset-light model and focus on delivery efficiency are strengths, but lack of brand diversification makes it vulnerable to pizza market saturation.
• Chipotle Mexican Grill, Inc. (CMG): Chipotle competes with Taco Bell in the Mexican fast-casual segment, offering higher-quality ingredients but at premium prices. Its strong same-store sales growth and loyal customer base are advantages, but limited international presence compared to Yum! Brands.