Is Yum China (YUMC) Stock Undervalued Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Yum China (YUMC). YUMC is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 16, which compares to its industry's average of 22.79. Over the last 12 months, YUMC's Forward P/E has been as high as 21.09 and as low as 14.45, with a median of 17.76.

Finally, investors should note that YUMC has a P/CF ratio of 11.87. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. YUMC's P/CF compares to its industry's average P/CF of 22.79. Over the past 52 weeks, YUMC's P/CF has been as high as 14.79 and as low as 10.47, with a median of 12.61.

These are only a few of the key metrics included in Yum China's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, YUMC looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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