Reasons to Sell Yum China and a Better Stock to Invest In

Yum China has remained relatively stagnant since October 2024, with a slight loss of 1.7% while hovering around $46.51. Despite outperforming the S&P 500, some caution should be exercised before including it in your investment portfolio. Here are three key reasons to be wary of Yum China and a more enticing stock option.

Yum China, a prominent restaurant company in China, spun off from Yum! Brands in 2016. However, its long-term revenue growth has been lackluster, averaging 5.2% annually over the past five years, below industry standards.

Analyst projections indicate a modest 5.2% revenue growth for Yum China in the next 12 months, reflecting the company's struggle to accelerate its top-line performance with new menu offerings.

Furthermore, Yum China's low gross margin of 18.6% in recent years suggests weak structural profitability and intense competition in the market, limiting its flexibility in case of unexpected demand fluctuations.

Despite recent market outperformance, Yum China's current price-to-earnings ratio of 17.9× at $46.51 per share may not offer substantial growth potential, prompting a cautious approach towards investing in this stock. Instead, exploring alternative investment opportunities such as a well-established Aerospace company with a successful M&A strategy could be more promising at this time.