Since May 2025, Yum China has been in a holding pattern, posting a small loss of 0.6% while floating around $45.85. The stock also fell short of the S&P 500’s 17.2% gain during that period.
Is now the time to buy Yum China, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.
Why Is Yum China Not Exciting?
We don't have much confidence in Yum China. Here are three reasons there are better opportunities than YUMC and a stock we'd rather own.
1. Flat Same-Store Sales Indicate Weak Demand
Same-store sales is an industry measure of whether revenue is growing at existing restaurants, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Yum China’s demand within its existing dining locations has barely increased over the last two years as its same-store sales were flat.
2. Low Gross Margin Reveals Weak Structural Profitability
We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate pricing power and differentiation, whether it be the dining experience or quality and taste of food.
Yum China has bad unit economics for a restaurant company, giving it less room to reinvest and grow its presence. As you can see below, it averaged a 20.1% gross margin over the last two years. Said differently, Yum China had to pay a chunky $79.88 to its suppliers for every $100 in revenue. 
3. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Yum China’s unimpressive 5.5% annual EPS growth over the last six years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Yum China isn’t a terrible business, but it doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 16.3× forward P/E (or $45.85 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.