Critical Survey: Yum China (YUMC) vs. CEC Entertainment (CEC)

Yum China (NYSE: YUMC) and CEC Entertainment (NYSE:CEC) are both cyclical consumer goods & services companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, dividends, valuation, earnings, analyst recommendations, risk and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Yum China and CEC Entertainment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Yum China 0 3 8 0 2.73
CEC Entertainment 0 0 0 0 N/A

Yum China presently has a consensus target price of $44.41, indicating a potential upside of 8.66%.

Profitability

This table compares Yum China and CEC Entertainment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Yum China 8.43% 21.35% 14.21%
CEC Entertainment N/A N/A N/A

Institutional & Insider Ownership

80.1% of Yum China shares are held by institutional investors. 0.2% of Yum China shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Yum China pays an annual dividend of $0.10 per share and has a dividend yield of 0.2%. CEC Entertainment does not pay a dividend. Yum China pays out 6.6% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Yum China and CEC Entertainment’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Yum China $6.75 billion 2.33 $502.00 million $1.51 27.07
CEC Entertainment N/A N/A N/A $2.73 N/A

Yum China has higher revenue and earnings than CEC Entertainment. CEC Entertainment is trading at a lower price-to-earnings ratio than Yum China, indicating that it is currently the more affordable of the two stocks.

Summary

Yum China beats CEC Entertainment on 8 of the 10 factors compared between the two stocks.

About Yum China

Yum China Holdings, Inc. is a restaurant company. The Company’s segments include KFC, Pizza Hut Casual Dining, and All Other Segments, including Pizza Hut Home Service, East Dawning, Little Sheep and Taco Bell. As of December 31, 2016, the Company had over 7,500 restaurants in China. Its restaurant base consists of various restaurant concepts. The Company’s restaurants in each of its concept offer consumers the ability to dine in and/or carry out food. In addition, KFC, Pizza Hut Casual Dining, Pizza Hut Home Service and East Dawning offer delivery service. KFC is the quick-service restaurant (QSR) brand. Pizza Hut Casual Dining is the casual dining restaurant (CDR) brand. As of December 31, 2016, the Company had over 360 Pizza Hut Home Service units in over 50 cities in China. The Little Sheep concept specializes in Hot Pot cooking. East Dawning is a Chinese food QSR brand. Taco Bell is a QSR brand specializing in Mexican-style food.

About CEC Entertainment

CEC Entertainment, Inc. is engaged in the family dining and entertainment center business. The Company develops, operates and franchises family dining and entertainment centers under the name Chuck E. Cheese’s. Chuck E. Cheese’s stores feature musical and comic entertainment by robotic and animated characters, arcade-style and skill-oriented games, video games, rides and other activities. All of its stores offer dining selections consisting of a range of beverages, pizzas, sandwiches, appetizers, a salad bar and desserts. As of January 1, 2012, the Company and its franchisees operated a total of 556 Chuck E. Cheese’s stores. As of January 1, 2012, it operated 507 Company-owned Chuck E. Cheese’s stores located in 44 states and Canada and its franchisees operated a total of 49 stores located in 15 states, Puerto Rico, Guam, Guatemala, Chile, Saudi Arabia and the United Arab Emirates. In February 2014, Apollo Global Management, LLC completed the acquisition of CEC Entertainment Inc.

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