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At US$60.42, Is It Time To Put Yum China Holdings, Inc. (NYSE:YUMC) On Your Watch List?

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Today we're going to take a look at the well-established Yum China Holdings, Inc. (NYSE:YUMC). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$64.35 at one point, and dropping to the lows of US$55.98. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Yum China Holdings' current trading price of US$60.42 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Yum China Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Yum China Holdings

What's the opportunity in Yum China Holdings?

The stock is currently trading at US$60.42 on the share market, which means it is overvalued by 35% compared to my intrinsic value of $44.86. Not the best news for investors looking to buy! Another thing to keep in mind is that Yum China Holdings’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Yum China Holdings look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 39% over the next couple of years, the future seems bright for Yum China Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in YUMC’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe YUMC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on YUMC for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for YUMC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 1 warning sign for Yum China Holdings you should be aware of.

If you are no longer interested in Yum China Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.