Yum! Brands, Inc.YUMNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $223.62 per share(market-calibrated)

+37.3%

Upside to Fair Value

Current

$162.92

Pure Model

$234.73

Fair Value

$223.62

Bull Case

$324.85

Bear Case

$167.72

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

1.27%

Calibrated Growth

2.57%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $234.73.

What's Driving This Ratingfor YUM

✓

CapEx already efficient

CapEx at 3.46% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 32.33% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

↑

Strong near-term revenue growth

Analyst consensus projects 10.80% revenue growth in Year 1, fading to 9.48% by Year 5 and 3.00% by Year 10. Revenue reaches $15.9B by Year 10 (vs $8.2B today).

🎯

Market pricing in lower growth than model

The market implies only 1.27% perpetual growth — 173bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 66.39% indicates efficient cash generation. FCF reaches $3.6B by Year 10 (22.83% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.66

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.46%

Cost of Debt

Pre-tax Cost of Debt4.32%

Tax Rate24.94%

After-tax Cost of Debt3.24%

Equity Weight (E/V)79.18%

Debt Weight (D/V)20.82%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (79.18% × 7.46%) + (20.82% × 3.24%)

= 6.58%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$9.1B	$10.2B	$12.2B	$14.1B	$15.9B
EBIT	$2.9B	$3.3B	$3.9B	$4.5B	$5.2B
Tax	$734M	$819M	$980M	$1.1B	$1.3B
NOPAT	$2.2B	$2.5B	$2.9B	$3.4B	$3.9B
+ Depreciation	$187M	$209M	$250M	$289M	$328M
- Capex	$315M	$352M	$421M	$487M	$552M
- Δ NWC	$10M	$6M	$11M	$10M	$5M
Free Cash Flow	$2.1B	$2.3B	$2.8B	$3.2B	$3.6B
Discount Factor	0.938	0.826	0.727	0.640	0.529
Present Value	$1.9B	$1.9B	$2.0B	$2.1B	$1.9B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.6B

Terminal Growth Rate3.00%

WACC6.58%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$104.7B

PV of Terminal Value$55.4B

Exit Multiple Method

Year 10 EBITDA$5.5B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$109.6B

PV of Terminal Value$58.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$19.8B

PV of Terminal Value$55.4B

Enterprise Value$75.2B

(-) Net Debt$11.2B

Equity Value$64.0B

Shares Outstanding278M

Price per Share$230.07

Exit Multiple Method

PV of Projected FCFs$19.8B

PV of Terminal Value$58.0B

Enterprise Value$77.8B

(-) Net Debt$11.2B

Equity Value$66.6B

Shares Outstanding278M

Price per Share$239.40

Pure Model Fair Value

$234.73

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
4.58%	$330.26	$371.04	$365.04	$348.74	$333.20
5.58%	$257.66	$275.87	$301.15	$338.58	$333.20
6.58%	$212.23	$222.10	$234.73	$251.46	$274.68
7.58%	$179.92	$185.90	$193.19	$202.27	$213.88
8.58%	$155.15	$159.05	$163.65	$169.15	$175.86

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$167.72

2.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.82

Base Case

$234.73

44.1% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.66

Bull Case

$324.85

99.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.56

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth10.80%

Year 3 Revenue Growth5.89%

Year 5 Revenue Growth9.48%

Year 7 Revenue Growth6.89%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin32.33%

Tax Rate24.94%

Historical Capex / Rev3.46%

NWC / Revenue1.08%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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