Yum! Brands (NYSE: YUM) and Sonic Corp. (NASDAQ:SONC) are both retail/wholesale companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, earnings, analyst recommendations, dividends, profitability, risk and valuation.
This table compares Yum! Brands and Sonic Corp.’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Yum! Brands pays an annual dividend of $1.20 per share and has a dividend yield of 1.6%. Sonic Corp. pays an annual dividend of $0.56 per share and has a dividend yield of 2.2%. Yum! Brands pays out 33.1% of its earnings in the form of a dividend. Sonic Corp. pays out 38.1% 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! Brands has increased its dividend for 8 consecutive years.
This is a summary of recent ratings and price targets for Yum! Brands and Sonic Corp., as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Yum! Brands currently has a consensus target price of $78.05, indicating a potential upside of 4.84%. Sonic Corp. has a consensus target price of $27.82, indicating a potential upside of 9.52%. Given Sonic Corp.’s higher possible upside, analysts clearly believe Sonic Corp. is more favorable than Yum! Brands.
Earnings and Valuation
This table compares Yum! Brands and Sonic Corp.’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Yum! Brands||$6.28 billion||4.09||$2.04 billion||$3.62||20.57|
|Sonic Corp.||$477.27 million||2.20||$159.99 million||$1.47||17.28|
Yum! Brands has higher revenue and earnings than Sonic Corp.. Sonic Corp. is trading at a lower price-to-earnings ratio than Yum! Brands, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Yum! Brands has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500. Comparatively, Sonic Corp. has a beta of 1.76, suggesting that its stock price is 76% more volatile than the S&P 500.
Insider and Institutional Ownership
72.0% of Yum! Brands shares are owned by institutional investors. 0.7% of Yum! Brands shares are owned by insiders. Comparatively, 6.2% of Sonic Corp. shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Yum! Brands beats Sonic Corp. on 11 of the 17 factors compared between the two stocks.
About Yum! Brands
YUM! Brands, Inc. is engaged in restaurant business. As of December 31, 2016, the Company operated or franchised over 43,500 restaurants in more than 135 countries and territories operating under the KFC, Pizza Hut or Taco Bell (collectively the Concepts) brands. The Company operates through three segments: The KFC Division, which includes the operations of the KFC concept around the world; The Pizza Hut Division, which includes the operations of the Pizza Hut concept around the world, and The Taco Bell Division, which includes the operations of the Taco Bell concept around the world. KFC restaurants across the world offer fried and non-fried chicken products, such as sandwiches, chicken strips, chicken-on-the-bone and other chicken products. Pizza Hut is a restaurant chain specialized in the sale of ready-to-eat pizza products. Taco Bell specializes in Mexican-style food products, including various types of tacos, burritos, quesadillas, salads, nachos and other related items.
About Sonic Corp.
Sonic Corp. operates and franchises the chain of drive-thru restaurants (Sonic Drive-Ins) in the United States. As of August 31, 2016, 3,557 Sonic Drive-Ins were in operation from coast to coast in 45 states, consisting of 345 Company drive-thrus and 3,212 franchise drive-thrus. As of August 31, 2016, its restaurant design and construction consisted of a kitchen housed in a one-story building, which was approximately 1,500 square feet, flanked by canopy-covered rows of 16 to 24 parking spaces, with each space having its own payment terminal, intercom speaker system and menu board. At a Sonic Drive-In, a customer drives into one of the parking spaces, orders through the intercom speaker system and has the food delivered by a carhop and Sonic Drive-Ins also include a drive-thru lane and patio seating to provide customers with alternative dining options. Its food items include specialty drinks, such as cherry limeades and slushes, ice cream desserts and chicken sandwiches and hamburgers.
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