Wingstop (WING) versus Yum China (YUMC) Critical Comparison
Wingstop (NASDAQ:WING) and Yum China (NYSE:YUMC) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, valuation, dividends, earnings, risk, analyst recommendations and institutional ownership.
Insider and Institutional Ownership
82.9% of Yum China shares are owned by institutional investors. 1.8% of Wingstop shares are owned by insiders. Comparatively, 0.4% of Yum China shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.
This table compares Wingstop and Yum China’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
This is a summary of recent ratings and recommmendations for Wingstop and Yum China, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Wingstop currently has a consensus target price of $63.73, suggesting a potential downside of 9.97%. Yum China has a consensus target price of $42.50, suggesting a potential upside of 33.44%. Given Yum China’s higher probable upside, analysts clearly believe Yum China is more favorable than Wingstop.
Earnings and Valuation
This table compares Wingstop and Yum China’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Wingstop||$105.55 million||19.63||$27.30 million||$0.74||95.66|
|Yum China||$7.14 billion||1.71||$403.00 million||$1.42||22.43|
Yum China has higher revenue and earnings than Wingstop. Yum China is trading at a lower price-to-earnings ratio than Wingstop, indicating that it is currently the more affordable of the two stocks.
Wingstop pays an annual dividend of $0.36 per share and has a dividend yield of 0.5%. Yum China pays an annual dividend of $0.40 per share and has a dividend yield of 1.3%. Wingstop pays out 48.6% of its earnings in the form of a dividend. Yum China pays out 28.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Yum China is clearly the better dividend stock, given its higher yield and lower payout ratio.
Risk and Volatility
Wingstop has a beta of 1.03, suggesting that its share price is 3% more volatile than the S&P 500. Comparatively, Yum China has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500.
Yum China beats Wingstop on 9 of the 16 factors compared between the two stocks.
Wingstop Inc., together with its subsidiaries, franchises and operates restaurants under the Wingstop brand name. Its restaurants offer cooked-to-order, hand-sauced, and tossed chicken wings. As of February 22, 2018, the company operated approximately 1,000 restaurants the United States, Mexico, Singapore, the Philippines, Indonesia, the United Arab Emirates, Malaysia, Saudi Arabia, and Colombia. Wingstop Inc. was founded in 1994 and is headquartered in Dallas, Texas.
About Yum China
Yum China Holdings, Inc. owns, operates, and franchises restaurants in China. The company operates in two segments, KFC and Pizza Hut. It operates restaurants under the KFC, Pizza Hut, Taco Bell, East Dawning, and Little Sheep brands, which specialize in chicken, pizza, hot pot cooking, Chinese food, and Mexican-style food categories. The company also provides online food delivery services. As of December 31, 2017, it operated approximately 5,400 KFC restaurants; 2,100 Pizza Hut restaurants; 280 Little Sheep units; 10 East Dawning restaurants; and 3 Taco Bell restaurants. Yum China Holdings, Inc. was incorporated in 2016 and is headquartered in Shanghai, the People's Republic of China.
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