How Does Yum China Holdings Inc’s (NYSE:YUMC) Earnings Growth Stack Up Against Industry Performance?
Analyzing Yum China Holdings Inc’s (NYSE:YUMC) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess YUMC’s recent performance announced on 31 December 2016 and compare these figures to its long-term trend and industry movements. View our latest analysis for Yum China Holdings
Did YUMC’s recent earnings growth beat the long-term trend and the industry?
I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to examine various companies on a more comparable basis, using new information. For Yum China Holdings, its most recent earnings (trailing twelve month) is $502.0M, which, against last year’s figure, has moved up by a significant 55.18%. Since these figures may be fairly myopic, I’ve estimated an annualized five-year value for Yum China Holdings’s earnings, which stands at $236.0M. This shows that, generally, Yum China Holdings has been able to consistently raise its net income over the last couple of years as well.
What’s enabled this growth? Let’s see if it is solely due to an industry uplift, or if Yum China Holdings has seen some company-specific growth. Over the past few years, Yum China Holdings grew bottom-line, while its top-line declined, by successfully managing its costs. This has caused to a margin expansion and profitability over time. Inspecting growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 13.82% in the past year, and 11.09% over the past five. This means that any uplift the industry is enjoying, Yum China Holdings is capable of leveraging this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Yum China Holdings to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for YUMC’s future growth? Take a look at our free research report of analyst consensus for YUMC’s outlook.
2. Financial Health: Is YUMC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2016. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
