As of June 16, 2025, Yum China Holdings Inc's estimated intrinsic value ranges from $26.20 to $73.04 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $73.04 | +67.6% |
| Discounted Cash Flow (5Y) | $64.65 | +48.4% |
| Dividend Discount Model (Multi-Stage) | $60.57 | +39.0% |
| Dividend Discount Model (Stable) | $47.54 | +9.1% |
| Earnings Power Value | $26.20 | -39.9% |
Is Yum China Holdings Inc (YUMC) undervalued or overvalued?
With the current market price at $43.57, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Yum China Holdings Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.71 | 0.73 |
| Cost of equity | 7.1% | 8.9% |
| Cost of debt | 4.0% | 4.5% |
| Tax rate | 26.7% | 26.8% |
| Debt/Equity ratio | 0.01 | 0.01 |
| After-tax WACC | 7.1% | 8.9% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $65 | $23,494M | 80.3% |
| 10-Year Growth | $73 | $26,626M | 64.5% |
| 5-Year EBITDA | $96 | $35,058M | 86.8% |
| 10-Year EBITDA | $99 | $36,351M | 74.0% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $720M |
| Discount Rate (WACC) | 8.9% - 7.1% |
| Enterprise Value | $8,125M - $10,152M |
| Net Debt | $(642)M |
| Equity Value | $8,767M - $10,794M |
| Outstanding Shares | 373M |
| Fair Value | $23 - $29 |
| Selected Fair Value | $26.20 |
| Metric | Value |
|---|---|
| Market Capitalization | $16266M |
| Enterprise Value | $15624M |
| Trailing P/E | 17.76 |
| Forward P/E | 15.06 |
| Trailing EV/EBITDA | 16.10 |
| Current Dividend Yield | 168.45% |
| Dividend Growth Rate (5Y) | 27.11% |
| Debt-to-Equity Ratio | 0.01 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $21.91 |
| Discounted Cash Flow (5Y) | 25% | $16.16 |
| Dividend Discount Model (Multi-Stage) | 20% | $12.11 |
| Dividend Discount Model (Stable) | 15% | $7.13 |
| Earnings Power Value | 10% | $2.62 |
| Weighted Average | 100% | $59.94 |
Based on our comprehensive valuation analysis, Yum China Holdings Inc's weighted average intrinsic value is $59.94, which is approximately 37.6% above the current market price of $43.57.
Key investment considerations:
Given these factors, we believe Yum China Holdings Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.