YUM Brands is a global quick‑service restaurant franchisor and operator whose financial profile combines stable, recurring earnings with conservative net leverage but visible pressure in profitability and short‑term liquidity.
The company shows several constructive signs: trailing twelve‑month net income recovered to $1.99B as of 2026‑03‑31, demonstrating scale in recurring earnings (Revenue & Net Income); net income stability is high with an avg/stdev metric of 8.0400, indicating predictable reported profits (Earnings Quality Analysis). Balance‑sheet leverage is conservative on a net basis, with a debt‑to‑equity reading of -1.4023 and interest coverage of 5.2456x, which supports capacity to service debt.
There are important weaknesses to note. Return on equity has been negative in every reported quarter and worsened to -27.3% as of 2026‑03‑31, reflecting an inability to generate positive equity returns (Return on Equity (ROE)). Reported profitability metrics are inconsistent: the only gross margin point in the set is -12.8% (period end 2016‑12‑31) (Profit Margin Trends), and the most recent reported quarterly revenue is an anomalous -$25.0M while quarterly net income fell from $788.0M at 2025‑12‑31 to $432.0M at 2026‑03‑31, highlighting volatility and possible reporting or timing issues (Revenue & Net Income). Liquidity is a concern at the operating‑cycle level: the current ratio sits below 1.0 at 0.9664. Meanwhile, investing cash outflows increased to -$422.0M (2024‑12‑31) and financing cash flow remains a sizable outflow at -$924.0M (2025‑12‑31), underlining active capital deployment and capital return patterns (Strategic Capital Allocation).
Key fundamental metrics to monitor are the trajectory of net income (TTM $1.99B) versus operating cash flow (most recent dataset $2.14B), whether the current ratio moves above 1.0 from 0.9664, any improvement in ROE from Return on Equity (ROE)), the trend in investing and financing cash flows (- $422.0M, - $924.0M) (Strategic Capital Allocation), and updates to revenue and EPS growth, revenue per share, valuation trends (Revenue & EPS Growth, EPS Diluted & Revenue per Share, Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
YUM BRANDS INC's quarterly net income shows recurring mid‑hundreds-of-millions readings through 2024 and early 2025 (e.g., $314M in 2024-03, $367M in 2024-06, $423M in 2024-12) with pronounced spikes in certain year‑end quarters — $926.0M (2022-12-31), $763.0M (2023-12-31) and $788.0M (2025-12-31). Most recently, net income declined from $788.0M at 2025-12-31 to $432.0M at 2026-03-31, making the latest quarter notably lower than the prior year‑end peaks.
Revenue points in the dataset are sparse and historic; the most recent revenue observation is an outlier negative value of $-25.0M for the period ending 2025-03-31, while earlier revenue entries include $3.01B (2016-06-11) and $92.0M (2016-12-31). The most recent quarterly net income was $432.0M. The most recent reported revenue was $-25.0M.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Dec 2015 to Dec 2016, Yum Brands Inc converts approximately -13¢ of every revenue dollar into gross profit (gross margin: -12.8%).The waterfall below shows how revenue flows through various expense categories.
Period Information
Report Type: Annual (10-K)
Period: Dec 2015 to Dec 2016
Analyzing long-term margin stability and competitive positioning
The chart contains a single observation for YUM BRANDS INC's gross margin for the trailing period ending 2016-12-31, showing a gross margin of -12.8%. With only one reported period, no multi-period trend or inflection point can be identified; the single reported value is negative, indicating a trailing twelve-month gross loss for that period.
Operating margin and net profit margin values are not provided in the supplied dataset, so no recent levels or trends can be reported for those metrics. The most recent Gross Margin was -12.8% (period end 2016-12-31). The most recent Operating Margin: not provided. The most recent Net Profit Margin: not provided.
Understanding Profit Margins
Between Dec 2015 and Dec 2016, Yum Brands Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
YUM BRANDS INC's trailing twelve-month net income has shown variability over the last several quarters: it rose to $1.91B in the period ending 2024-03-31, fell to $1.49B by 2024-12-31, and then recovered through 2025 to reach $1.99B as of 2026-03-31. Notable inflection points in the provided series are the peak around March 2024, the trough at December 2024, and the subsequent rebound into early 2026.
Operating cash flow (TTM) in the provided dataset appears only for the period ending 2015-12-26 at $2.14B; that 2015 value exceeds the net income observations in the available series. No more recent operating cash flow TTM values are present in the chart data for direct comparison with the recent net income trend. The most recent Net Income (TTM) was $1.99B (period end 2026-03-31). The most recent Operating Cash Flow (TTM) value available in the dataset was $2.14B (period end 2015-12-26).
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
YUM BRANDS INC's trailing twelve-month Return on Equity has been negative in every reported quarter, with the most recent reading showing a pronounced deterioration. ROE moved from -11.5% at 2020-12-31 to -18.8% at 2021-12-31 and -19.4% at 2022-03-31, improved to -14.9% at 2022-12-31, then declined sharply to -27.3% at 2026-03-31. The latest quarter is materially more negative than the earlier observations.
Most recent Return on Equity: -27.3% as of 2026-03-31
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
YUM BRANDS INC's trailing twelve-month series shows a clear increase in investing cash outflows between the most recent annual points: investing cash flow moved from -$107.0M at period end 2023-12-31 to -$422.0M at 2024-12-31, indicating a larger net cash use in investing over that interval. Financing cash flow has been consistently negative across the reported points, with a peak outflow of -$2.10B at 2021-03-31 and a more recent net financing outflow of -$924.0M at 2025-12-31. Operating cash flow data in this dataset is only represented at an earlier date (period end 2015-12-26) and is shown at $2.14B for that trailing twelve-month period.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.