On the four Ms, Yum! Brands Inc. earns 45 for management and 67 for moat. The management score rests on a return on invested capital of 28.3% and a gross margin of 46.2% — figures that describe returns closer to the cost of the capital behind them. Shareholder equity is negative, so the debt-to-equity figure is not meaningful here — usually the mark of heavy buybacks rather than distress, but worth checking. A solid moat alongside mixed management is a combination worth understanding before the price matters at all.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 7.8% a year, below the 8.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 15.5x. That produces an intrinsic value of $64.52, a 10-CAP price of $64.52 and a payback time price of $73.33, with the value zone set at the highest of the three, $73.33. Today's price of $136.77 is 87% above it.
The price is above the value zone and the business scores 67 for moat and 45 for management. Neither test argues for paying up here.
| Price | $136.77 |
| Market cap | $37.7B |
| P/E ratio | 17.2x |
| Return on invested capital | 28.3% |
| Gross margin | 46.2% |
| Debt to equity | -1.63x |
| Free cash flow yield | 3.9% |
| Growth rate used | 7.8% |
| Growth rate measured | 8.0% |
| Exit multiple assumed | 15.5x |
| Company | Moat | Buy price |
| Chipotle Mexican Grill (CMG) | 76 | $21.76 |
| Restaurant Brands Intl. (QSR) | 54 | $53.50 |
| Darden Restaurants (DRI) | 66 | $160.15 |
| Yum China Holdings Inc (YUMC) | 58 | $36.52 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Yum! Brands Inc. rather than accepting ours.