Contrasting Fogo De Chao (FOGO) & Yum China (YUMC)

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

Analyst Recommendations

This is a breakdown of current ratings and target prices for Fogo De Chao and Yum China, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fogo De Chao 0 3 3 0 2.50
Yum China 0 3 9 0 2.75

Fogo De Chao currently has a consensus target price of $14.17, indicating a potential upside of 13.79%. Yum China has a consensus target price of $45.29, indicating a potential upside of 13.03%. Given Fogo De Chao’s higher probable upside, research analysts plainly believe Fogo De Chao is more favorable than Yum China.

Dividends

Yum China pays an annual dividend of $0.10 per share and has a dividend yield of 0.2%. Fogo De Chao does not pay a dividend. Yum China pays out 9.9% of its earnings in the form of a dividend.

Institutional & Insider Ownership

85.4% of Fogo De Chao shares are owned by institutional investors. Comparatively, 80.3% of Yum China shares are owned by institutional investors. 82.8% of Fogo De Chao shares are owned by company insiders. Comparatively, 0.2% of Yum China shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Fogo De Chao and Yum China’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fogo De Chao $288.30 million 1.22 $24.43 million $0.72 17.29
Yum China $7.14 billion 2.16 $403.00 million $1.01 39.67

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

Profitability

This table compares Fogo De Chao and Yum China’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fogo De Chao 6.76% 7.36% 4.21%
Yum China 5.64% 21.06% 14.10%

Summary

Yum China beats Fogo De Chao on 10 of the 15 factors compared between the two stocks.

Fogo De Chao Company Profile

Fogo de Chao, Inc. is a United States-based holding company. The Company, through its subsidiaries, operates upscale Brazilian churrascaria steakhouses under the brand of Fogo de Chao. The Company owns 100% of Brasa (Purchaser) Inc. (Brasa Purchaser), which owns 100% of Brasa (Holdings) Inc. (Brasa Holdings). The Company operates through two segments: United States and Brazil. It specializes in fire-roasting meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco. The Company offers its guests a tasting menu of meats featuring up to 20 cuts, simply seasoned and fire-roasted to expose their natural flavors. The Company operates approximately 26 restaurants in the United States, 10 in Brazil and one in Mexico. The Company operates a range of restaurant formats, including in-line and free-standing locations. Its restaurants range in size from approximately 7,000 to 16,000 square feet, with seating from 200 to 500 guests.

Yum China Company Profile

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.

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