Yum China Holdings, Inc. (YUMC): what the price requires

The current priced-in claim for Yum China Holdings, Inc. (YUMC) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/YUMC

Headline

FieldValue
TickerYUMC
CompanyYum China Holdings, Inc.
Current price$43.90/sh
CompositionCompany sales 94% / Franchise fees and income 1% / Revenues from transactions with franchisees 4% / Other revenues 1%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed2.9%
Operating margin today12.7%
Margin compression implied-9.8pp
Multiple paid11x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 8.3% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range

ReferenceValue
vs own history-1.13σ
cohort percentile (of 210 peers)19
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.46x5expensive
Earnings1.77x5expensive
Relative0.53x5justifies
Growth1.01x4expensive

Families that justify the price: Relative, Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.

Per-Model Detail (n=19)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$64.820.68xyesFCF base $1.0B, growth 7% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection
DCF Exit MultipleGrowth$52.120.84xyesExit EV/EBITDA: 7.7x / 9.7x / 11.7x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$82.980.53xyesP/E 28x (static sector reference · 2026-04), scenarios: 23.3x / 28.0x / 32.7x (bear / base = reference held flat / bull), EV/EBITDA 18x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$30.471.44xyesStage 1: 13% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$28.891.52xyesBV/sh $15.35, ROE (TTM) 17.4%, ke 9.3%
Two-Stage Excess ReturnAsset$39.121.12xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$37.371.17xyesRev $12.1B, growth 7% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.3x / 1.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$32.941.33xyesEPS $2.61, growth 13% (input: historical EPS growth), PEG=1.30 (Fair)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$24.751.77xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.18B × (1−27%) / WACC 8.5% → EPV (no growth)
Residual IncomeAsset$39.171.12xyesBV $15.35 + 5yr PV of (ROE (TTM) 17.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$30.021.46xyes√(22.5 × EPS $2.61 × BVPS $15.35) — Graham's conservative floor
EV/EBITDA RelativeRelative$86.160.51xyesEBITDA $1.79B × sector EV/EBITDA 18.0x
FCF YieldEarnings$23.371.88xyesFCF $931.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$22.061.99xyesSBC-adj FCF $0.89B (FCF $0.93B − SBC $0.04B) capitalized at Kₑ
Ben Graham FormulaEarnings$73.800.59xyesEPS $2.61 × (8.5 + 2×12.6%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$8.105.42xyesBV $15.35 × (ROIC 4.5% / WACC 8.5%)
P/Sales SectorRelative$153.650.29xyesRevenue $12.09B × sector P/S 4.5x
PEG Fair ValueRelative$49.400.89xyesEPS $2.61 × (PEG 1.5 × growth 12.6% (input: historical EPS growth)) → PE 18.9x
Earnings YieldEarnings$28.221.56xyesEPS $2.61 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net cash$1.4b
Net debt / NOPAT (after-tax)-1.20x (net cash)
Net debt / operating income (pre-tax)-0.87x (net cash)
Share count CAGR (buyback)-4.7%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

What a standard restaurant multiple misses about Yum China is that the company is simultaneously a growth story and a cash-return story, which the market rarely prices together. On growth, it is still in the early innings of penetrating a market the size of China: store count reached more than 16,600 at the end of 2025, including roughly 11,900 KFC and 3,800 Pizza Hut locations, and management plans to keep adding well over 1,900 net new stores a year toward a 20,000-store target. Crucially, it is doing this more cheaply over time. The 10-K describes a deliberate strategy to "lower the capital expenditures per store to tap into more locations," using "flexible store models and lower upfront investment" to reach smaller cities. Lower build cost per unit means higher returns on each new store, which is the opposite of what most operators face as they saturate their best markets.

The cash-return side is what the cautious China narrative overlooks. Yum China is funneling enormous capital back to shareholders: a commitment of about $1.5 billion in 2026, including a new $460 million buyback, a 21% dividend increase, and roughly $3 billion of total returns across 2025 and 2026. With a net-cash balance sheet of about $1.35 billion and minimal debt, those returns are funded from operations and a fortress balance sheet, not borrowing. The share count is already shrinking at nearly 5% a year, so the per-share growth compounds faster than the headline profit.

The operating momentum underneath is steadier than the China gloom implies. Fourth-quarter same-store sales rose 3%, the third consecutive quarter of growth, same-store transactions grew 4%, the twelfth consecutive quarter, and operating profit jumped 25%. Rising transactions for twelve straight quarters means more customers are coming more often, which is the cleanest signal of brand health, and management's 2026 guidance for high-single-digit operating-profit growth and double-digit earnings growth shows the model converting traffic into profit. A growing store base, falling unit costs, traffic compounding, and a near-5% buyback at a single-digit operating multiple is the combination traditional valuation under-credits when it stamps the stock with a China discount.

Bear Case

The most honest bear framing is to look at where the valuation methods disagree and ask which ones are telling the truth. Here the relative-multiple lens says the stock is cheap, the growth-DCF lens reaches the price, but the earnings-power lens calls it expensive. That split is not random: the relative lens benchmarks Yum China against U.S. restaurant peers and rewards it for trading at a discount to them, but a U.S. peer multiple may be the wrong yardstick for a company whose entire earnings base sits inside China, where the appropriate discount for consumer, currency, and regulatory risk is genuinely higher. If the right comparison set carries a structurally lower multiple, the cheapness the relative lens sees is partly an illusion of the wrong benchmark.

The operating risk that justifies a discount is real. Yum China sells discretionary meals to Chinese consumers who have turned more cautious, and it does so in a market the 10-K describes as "highly competitive with respect to price and quality of food products, new product development, advertising levels" and promotion. Same-store sales growth of 3% is positive but modest, and a meaningful part of it comes from transaction growth rather than higher spend per visit, which can signal that customers are trading down to value offerings, a dynamic that protects traffic but pressures margin and average ticket. A renewed consumer slowdown in China would show up directly in same-store sales and would slow the unit-expansion economics the bull case depends on.

Then there is the country-risk layer that the static methods cannot fully capture. The 10-K flags "heightened data and cybersecurity regulations, including those enforced by the Cyberspace Adm"inistration, and warns those areas will receive greater regulatory attention, raising compliance costs and risk. As a U.S.-listed company operating entirely in China, Yum China sits at the intersection of two regulatory regimes, and shifts in either, data rules, foreign-listing requirements, or broader U.S.-China tension, can move the stock independent of the business. The price near 11 times operating income looks undemanding, below what even a modest profit decline would warrant, but that low multiple is the market pricing exactly these risks. The bear case is that the discount is deserved, not a gift, and that the earnings-power lens calling the price expensive is the more honest read once the China risks are weighed properly.

Valuation

At the current price the market pays about 11 times company-wide operating income, a multiple so low that the price sits below what even a 5%-a-year operating-profit decline would warrant. That is a bound, not a solved growth rate, and it tells you the price is pricing in stagnation or modest contraction. Against a company guiding to high-single-digit operating-profit growth and double-digit earnings growth, the embedded pessimism is striking, but it is the market applying a China discount to an otherwise growing business.

The valuation families disagree in a way that frames the whole debate. The relative-multiple lens reads the stock as cheap against restaurant peers, the growth-DCF lens reaches the price, and the earnings-power lens calls it expensive. The reconciliation depends entirely on the benchmark: if Yum China deserves the multiple of a high-quality global restaurant operator, the relative lens is right and the stock is materially undervalued; if it deserves the lower multiple appropriate to a China-concentrated consumer business, the earnings-power lens is closer to the truth. The price reflects the market currently siding with the cautious read, which is why a quality compounder trades at a single-digit operating multiple.

Solvency is unambiguously strong and supports the cash-return thesis. Net cash of about $1.35 billion against negligible debt means there is no financial risk, and the aggressive buyback and dividend program is funded from cash generation. The downside is not the balance sheet; it is the durability of same-store sales and the unit-growth economics in a soft Chinese consumer environment, plus the regulatory and listing risks that the low multiple is already discounting. The price assumes those risks are real but manageable; the bull and bear ultimately argue over whether the discount is too deep or about right.

Catalysts

The fourth-quarter 2025 results, reported in early February 2026, beat estimates and showed steady momentum. Same-store sales rose 3%, the third consecutive quarter of growth, same-store transactions grew 4%, the twelfth straight quarter, system sales increased 7%, and operating profit jumped 25%. The transaction trend is the cleanest forward signal, because rising visit counts over three years indicate the brands are still gaining customers even in a cautious consumer market.

Unit growth and capital return are the structural catalysts. The store base exceeded 16,600 at the end of 2025, and management plans well over 1,900 net new stores a year toward a 20,000-store target, with falling capital expenditure per store improving the returns on that expansion. On capital return, the company committed to about $1.5 billion in 2026, including a $460 million buyback, raised its dividend 21%, and is on track for roughly $3 billion of total returns across 2025 and 2026.

Guidance and sentiment frame the upside. Management projects mid-to-high single-digit system-sales growth, high-single-digit operating-profit growth, double-digit earnings growth, and slight margin improvement for 2026, while analysts carry an average price target around $59, well above the current price. The events most likely to move the thesis are the quarterly same-store-sales and transaction prints, the pace of net new store openings, the trajectory of Chinese consumer spending, and any change in the data or foreign-listing regulatory environment.

Peer Cohorts (Per Segment, With Filing Citations)

KFC (reported)

Pizza Hut (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Yum China Q4 2025 results, February 2026 · Yum China Q4 2025 results and FY2025 10-K · Yum China 2026 guidance and analyst notes via stockanalysis.com, 2026

View the full interactive YUMC report on boothcheck