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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (15937)	12/18/2002 3:35:02 PM
From: sjemmeri	Respond to of 79054

Coincidentally, from briefing.com today: Yum! Brands (YUM) 23.87 +0.67: As Briefing.com has noted on several occasions over the past couple of weeks this is a good time of year to be hunting for bargains, as stocks trading near their lows often rebound early in the new year. One stock which fits the bill is Yum! Brands. YUM, which operates the Pizza Hut, KFC, Taco Bell, Long John Silver's, and A&W All-American Food quick service restaurants, is down nearly 28% from its midyear and 52-wk high of 33.17 Decline triggered by general market weakness, a couple of earnings warnings, concern over debt load and poor results from fast-food king McDonald's. While all of these concerns were legitimate, Briefing.com contends that the downside risk from current levels is minimal as YUM is trading at deep discounts to the market. At present, YUM sports a forward p/e (based on confirmed estimate for FY02 of $1.89) of 12.7x. Multiple falls to 11.6x when using consensus figure for FY03. By comparison, S&P 500 trading at roughly 16.5x CY03 estimates. Stock's price/sales ratio of 0.97 and price/cash flow ratio of 7.8x are also well below market and industry averages. Discounted multiples are one reason to consider YUM. Another is that management continues to do a good job of improving operating efficiencies. Inventory and receivables trends are both favorable, suggesting that YUM is well positioned to leverage modest improvement in industry conditions into solid bottom-line improvement. Considering that 9 of the 13 analysts surveyed by First Call rate the stock Neutral or Hold, any upside surprises to earnings resulting from the improved operating efficiencies likely to result in ratings upgrades. Anybody familiar with the way Wall Street works knows that positive earnings surprises and ratings upgrades are a powerful one-two combination. Assuming YUM meets or beats consensus forecasts going forward, investors should expect at least moderate multiple expansion. At 15x projected FY03 earnings stock has upside to 31, or 29% above today's price. -- Robert Walberg, Briefing.com