Leila Zhang, Chief Technology Officer at Yum China Holdings YUMC, reported an insider sell on November 19, according to a new SEC filing.

What Happened: According to a Form 4 filing with the U.S. Securities and Exchange Commission on Tuesday, Zhang sold 7,197 shares of Yum China Holdings. The total transaction value is $339,770.

During Tuesday’s morning session, Yum China Holdings shares down by 0.9%, currently priced at $47.23.

Get to Know Yum China Holdings Better

With almost 13,000 units and USD 10 billion in systemwide sales in 2022, Yum China is the largest restaurant chain in China. It generates revenue through its own restaurants and franchise fees. Key concepts include KFC (9,094 units) and Pizza Hut (2,903), but the company’s portfolio also includes other brands such as Little Sheep, East Dawning, Taco Bell, Huang Ji Huang, COFFii & Joy, and Lavazza (collectively representing about 950 units). Yum China is a trademark licensee of Yum Brands, paying 3% of total systemwide sales to the company it separated from in October 2016.

Unraveling the Financial Story of Yum China Holdings

Revenue Growth: Yum China Holdings displayed positive results in 3 months. As of 30 September, 2024, the company achieved a solid revenue growth rate of approximately 5.39%. This indicates a notable increase in the company’s top-line earnings. As compared to its peers, the revenue growth lags behind its industry peers. The company achieved a growth rate lower than the average among peers in Consumer Discretionary sector.

Profitability Metrics: Unlocking Value

• Gross Margin: The company faces challenges with a low gross margin of 17.91%, suggesting potential difficulties in cost control and profitability compared to its peers.

• Earnings per Share (EPS): Yum China Holdings’s EPS is significantly higher than the industry average. The company demonstrates a robust bottom-line performance with a current EPS of 0.77.

Debt Management: Yum China Holdings’s debt-to-equity ratio is below industry norms, indicating a sound financial structure with a ratio of 0.45.

Assessing Valuation Metrics:

• Price to Earnings (P/E) Ratio: The P/E ratio of 21.0 is lower than the industry average, implying a discounted valuation for Yum China Holdings’s stock.

• Price to Sales (P/S) Ratio: With a P/S ratio of 1.7 below industry standards, the stock shows potential undervaluation, making it an appealing investment option for those focusing on sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): Yum China Holdings’s EV/EBITDA ratio at 11.25 suggests potential undervaluation, falling below industry averages.

Market Capitalization Analysis: With a profound presence, the company’s market capitalization is above industry averages. This reflects substantial size and strong market recognition.

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Why Insider Transactions Are Key in Investment Decisions

Insider transactions are not the sole determinant of investment choices, but they are a factor worth considering.

In legal terms, an “insider” refers to any officer, director, or beneficial owner of more than ten percent of a company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934. This can include executives in the c-suite and large hedge funds. These insiders are required to let the public know of their transactions via a Form 4 filing, which must be filed within two business days of the transaction.

When a company insider makes a new purchase, that is an indication that they expect the stock to rise.

Insider sells, on the other hand, can be made for a variety of reasons, and may not necessarily mean that the seller thinks the stock will go down.

The Insider’s Guide to Important Transaction Codes

For investors, a primary focus lies on transactions occurring in the open market, as indicated in Table I of the Form 4 filing. A P in Box 3 denotes a purchase, while S signifies a sale. Transaction code C signals the conversion of an option, and transaction code A denotes a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of Yum China Holdings’s Insider Trades.

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This article was generated by Benzinga’s automated content engine and reviewed by an editor.