Can Yum! Brands Break Out?

With shares of Yum! Brands (NYSE:YUM) trading around $68, is YUM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Yum! Brands is a quick service restaurant company based on number of system units, with approximately 37,000 units in more than 120 countries and territories. The company — through its three main restaurants of KFC, Pizza Hut, and Taco Bell — develops, operates, franchises, and licenses a worldwide system of restaurants. These popular food chains prepare, package, and sell a menu of priced food items. Convenience and tasteful foods continue to rise in popularity worldwide, which allows Yum! Brands to be able to provide the food items demanded by consumers worldwide. Through its segments, Yum! Brands will continue to supply its world audience with quick and tasty items for many years.

T = Technicals on the Stock Chart are Mixed

Yum! Brands stock has been consolidating after a few years of explosive moves higher. The stock is still in the middle of its consolidation range, but a solid break higher will surely see a powerful move. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Yum! Brands is trading around its rising key averages which signal neutral price action in the near-term.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

YUM

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Yum! Brands options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Yum! Brands Options

27.7%

93%

90%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

More Articles About:   , , ,