Sonic (NASDAQ: SONC) and Yum China (NYSE:YUMC) are both retail/wholesale companies, but which is the better business? We will compare the two businesses based on the strength of their risk, analyst recommendations, earnings, dividends, profitability, institutional ownership and valuation.
This is a summary of recent recommendations and price targets for Sonic and Yum China, as provided by MarketBeat.com.
||Strong Buy Ratings
Sonic currently has a consensus price target of $27.82, indicating a potential upside of 3.45%. Yum China has a consensus price target of $44.41, indicating a potential upside of 8.18%. Given Yum China’s stronger consensus rating and higher possible upside, analysts plainly believe Yum China is more favorable than Sonic.
Sonic pays an annual dividend of $0.64 per share and has a dividend yield of 2.4%. Yum China pays an annual dividend of $0.10 per share and has a dividend yield of 0.2%. Sonic pays out 43.5% of its earnings in the form of a dividend. Yum China pays out 6.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.
Valuation & Earnings
This table compares Sonic and Yum China’s top-line revenue, earnings per share (EPS) and valuation.
||Earnings Per Share
Yum China has higher revenue and earnings than Sonic. Sonic is trading at a lower price-to-earnings ratio than Yum China, indicating that it is currently the more affordable of the two stocks.
This table compares Sonic and Yum China’s net margins, return on equity and return on assets.
||Return on Equity
||Return on Assets
Institutional and Insider Ownership
86.6% of Yum China shares are owned by institutional investors. 6.2% of Sonic shares are owned by company insiders. Comparatively, 0.2% of Yum China shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Yum China beats Sonic on 11 of the 14 factors compared between the two stocks.
Sonic Company Profile
Sonic Corp. operates and franchises the chain of drive-thru restaurants (Sonic Drive-Ins) in the United States. As of August 31, 2016, 3,557 Sonic Drive-Ins were in operation from coast to coast in 45 states, consisting of 345 Company drive-thrus and 3,212 franchise drive-thrus. As of August 31, 2016, its restaurant design and construction consisted of a kitchen housed in a one-story building, which was approximately 1,500 square feet, flanked by canopy-covered rows of 16 to 24 parking spaces, with each space having its own payment terminal, intercom speaker system and menu board. At a Sonic Drive-In, a customer drives into one of the parking spaces, orders through the intercom speaker system and has the food delivered by a carhop and Sonic Drive-Ins also include a drive-thru lane and patio seating to provide customers with alternative dining options. Its food items include specialty drinks, such as cherry limeades and slushes, ice cream desserts and chicken sandwiches and hamburgers.
Yum China Company Profile
Yum China Holdings, Inc. is a restaurant company. The Company’s segments include KFC, Pizza Hut Casual Dining, and All Other Segments, including Pizza Hut Home Service, East Dawning, Little Sheep and Taco Bell. As of December 31, 2016, the Company had over 7,500 restaurants in China. Its restaurant base consists of various restaurant concepts. The Company’s restaurants in each of its concept offer consumers the ability to dine in and/or carry out food. In addition, KFC, Pizza Hut Casual Dining, Pizza Hut Home Service and East Dawning offer delivery service. KFC is the quick-service restaurant (QSR) brand. Pizza Hut Casual Dining is the casual dining restaurant (CDR) brand. As of December 31, 2016, the Company had over 360 Pizza Hut Home Service units in over 50 cities in China. The Little Sheep concept specializes in Hot Pot cooking. East Dawning is a Chinese food QSR brand. Taco Bell is a QSR brand specializing in Mexican-style food.
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