Financial Analysis: Yum! Brands (NYSE:YUM) versus FAT Brands (NASDAQ:FATBB)

FAT Brands (NASDAQ:FATBB) and Yum! Brands (NYSE:YUM) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, institutional ownership, earnings, dividends, profitability and risk.

Analyst Ratings

This is a breakdown of current recommendations and price targets for FAT Brands and Yum! Brands, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FAT Brands	0	0	0	0	N/A
Yum! Brands	0	9	7	0	2.44

Yum! Brands has a consensus target price of $145.25, suggesting a potential upside of 11.22%. Given Yum! Brands’ higher possible upside, analysts plainly believe Yum! Brands is more favorable than FAT Brands.

Earnings and Valuation

This table compares FAT Brands and Yum! Brands”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FAT Brands	$572.01 million	0.13	-$90.11 million	($6.17)	-0.73
Yum! Brands	$7.11 billion	5.18	$1.60 billion	$5.64	23.16

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

Volatility & Risk

FAT Brands has a beta of 0.89, meaning that its share price is 11% less volatile than the S&P 500. Comparatively, Yum! Brands has a beta of 1.08, meaning that its share price is 8% more volatile than the S&P 500.

Insider & Institutional Ownership

82.4% of Yum! Brands shares are owned by institutional investors. 59.9% of FAT Brands shares are owned by insiders. Comparatively, 0.3% of Yum! Brands shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares FAT Brands and Yum! Brands’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FAT Brands	-22.48%	N/A	-8.89%
Yum! Brands	21.96%	-18.90%	23.83%

Dividends

FAT Brands pays an annual dividend of $0.56 per share and has a dividend yield of 12.4%. Yum! Brands pays an annual dividend of $2.68 per share and has a dividend yield of 2.1%. FAT Brands pays out -9.1% of its earnings in the form of a dividend. Yum! Brands pays out 47.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. FAT Brands has increased its dividend for 2 consecutive years. FAT Brands is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Yum! Brands beats FAT Brands on 11 of the 16 factors compared between the two stocks.

About FAT Brands

FAT Brands Inc., a multi-brand restaurant franchising company, acquires, develops, markets, and manages quick service, fast casual, casual dining, and polished casual dining restaurant concepts worldwide. It owns restaurant brands, including Round Table Pizza, Marble Slab Creamery, Great American Cookies, Hot Dog on a Stick, Pretzelmaker, Fazoli's, Fatburger, Johnny Rockets, Elevation Burger, Yalla Mediterranean, Buffalo's Cafe and Buffalo's Express, Hurricane Grill & Wings, Ponderosa Steakhouse/Bonanza Steakhouse, Native Grill & Wings, Smokey Bones, and Twin Peaks. The company was incorporated in 2017 and is headquartered in Beverly Hills, California. FAT Brands Inc. is a subsidiary of Fog Cutter Holdings, LLC.

About Yum! Brands

Yum! Brands, Inc., together with its subsidiaries, develops, operates, and franchises quick service restaurants worldwide. The company operates through the KFC Division, the Taco Bell Division, the Pizza Hut Division, and the Habit Burger Grill Division segments. It also operates restaurants under the KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill brands, which specialize in chicken, pizza, made-to-order chargrilled burgers, sandwiches, Mexican-style food categories, and other food products. The company was formerly known as TRICON Global Restaurants, Inc. and changed its name to Yum! Brands, Inc. in May 2002. Yum! Brands, Inc. was incorporated in 1997 and is headquartered in Louisville, Kentucky.