Del Taco Restaurants (NASDAQ: TACO) and Yum China (NYSE:YUMC) are both retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, risk, earnings, analyst recommendations and profitability.
This table compares Del Taco Restaurants and Yum China’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Del Taco Restaurants||4.78%||5.89%||3.08%|
This is a breakdown of current ratings and recommmendations for Del Taco Restaurants and Yum China, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Del Taco Restaurants||0||1||4||0||2.80|
Del Taco Restaurants currently has a consensus price target of $16.40, suggesting a potential upside of 33.77%. Yum China has a consensus price target of $44.41, suggesting a potential upside of 8.18%. Given Del Taco Restaurants’ stronger consensus rating and higher probable upside, research analysts clearly believe Del Taco Restaurants is more favorable than Yum China.
Institutional & Insider Ownership
81.4% of Del Taco Restaurants shares are held by institutional investors. Comparatively, 86.6% of Yum China shares are held by institutional investors. 14.6% of Del Taco Restaurants shares are held by company insiders. Comparatively, 0.2% of Yum China shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Valuation and Earnings
This table compares Del Taco Restaurants and Yum China’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Del Taco Restaurants||$452.08 million||1.05||$20.91 million||$0.56||21.89|
|Yum China||$6.75 billion||2.34||$502.00 million||$1.47||27.93|
Yum China has higher revenue and earnings than Del Taco Restaurants. Del Taco Restaurants is trading at a lower price-to-earnings ratio than Yum China, indicating that it is currently the more affordable of the two stocks.
Yum China pays an annual dividend of $0.10 per share and has a dividend yield of 0.2%. Del Taco Restaurants does not pay a dividend. Yum China pays out 6.8% of its earnings in the form of a dividend.
Yum China beats Del Taco Restaurants on 11 of the 15 factors compared between the two stocks.
Del Taco Restaurants Company Profile
Del Taco Restaurants, Inc. is an operator and franchisor of restaurants featuring made-to-order cuisine, including both Mexican inspired and American classic dishes. As of January 3, 2017, the Company operated 551 Del Taco restaurants. The Company’s menu offers a combination of Mexican-inspired food, such as tacos and burritos, and American classics, such as Double Del cheeseburgers, crinkle-cut fries and milkshakes. The Company’s menu features items, such as its Platos plated meals, Epic Burritos, Handcrafted Ensaladas and Fresca Bowls, as well as items on its Buck & Under Menu. As of January 3, 2017, the Company had 310 Company-operated and 241 franchise-operated restaurants. The Platos menu offering consists of individually plated meals complete with an entree, two sides, and chips and salsa. The Company’s menu also includes quesadillas, bowls and handcrafted ensaladas, as well as burgers and fries.
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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