Rocky Mountain Chocolate Factory (NASDAQ:RMCF) & Yum! Brands (NYSE:YUM) Critical Comparison

Rocky Mountain Chocolate Factory (NASDAQ:RMCF) and Yum! Brands (NYSE:YUM) are both retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, valuation, analyst recommendations, profitability, institutional ownership, earnings and risk.

Dividends

Rocky Mountain Chocolate Factory pays an annual dividend of $0.48 per share and has a dividend yield of 27.9%. Yum! Brands pays an annual dividend of $2.84 per share and has a dividend yield of 2.1%. Rocky Mountain Chocolate Factory pays out -78.7% of its earnings in the form of a dividend. Yum! Brands pays out 56.0% 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. Yum! Brands has raised its dividend for 8 consecutive years. Rocky Mountain Chocolate Factory is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Rocky Mountain Chocolate Factory and Yum! Brands’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rocky Mountain Chocolate Factory	-15.77%	-63.75%	-22.21%
Yum! Brands	18.11%	-21.01%	24.18%

Earnings & Valuation

This table compares Rocky Mountain Chocolate Factory and Yum! Brands”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rocky Mountain Chocolate Factory	$29.99 million	0.45	-$6.12 million	($0.61)	-2.82
Yum! Brands	$7.91 billion	4.84	$1.49 billion	$5.07	27.22

Yum! Brands has higher revenue and earnings than Rocky Mountain Chocolate Factory. Rocky Mountain Chocolate Factory is trading at a lower price-to-earnings ratio than Yum! Brands, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations for Rocky Mountain Chocolate Factory and Yum! Brands, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rocky Mountain Chocolate Factory	1	0	0	0	1.00
Yum! Brands	0	13	11	0	2.46

Yum! Brands has a consensus target price of $162.82, suggesting a potential upside of 17.97%. Given Yum! Brands’ stronger consensus rating and higher possible upside, analysts plainly believe Yum! Brands is more favorable than Rocky Mountain Chocolate Factory.

Risk & Volatility

Rocky Mountain Chocolate Factory has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500. Comparatively, Yum! Brands has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500.

Institutional and Insider Ownership

50.3% of Rocky Mountain Chocolate Factory shares are owned by institutional investors. Comparatively, 82.4% of Yum! Brands shares are owned by institutional investors. 42.2% of Rocky Mountain Chocolate Factory shares are owned by company insiders. Comparatively, 0.3% of Yum! Brands shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Yum! Brands beats Rocky Mountain Chocolate Factory on 13 of the 17 factors compared between the two stocks.

About Rocky Mountain Chocolate Factory

Rocky Mountain Chocolate Factory, Inc., together with its subsidiaries, operates as a confectionery franchisor, manufacturer, and retail operator. It operates through Franchising, Manufacturing, Retail Stores, and Other segments. The company produces approximately 400 chocolate candies and other confectionery products, including clusters, caramels, creams, toffees, mints, and truffles; and offers 15 varieties of caramel apples and other products that are prepared in individual stores, as well as provides ice cream, coffee, and other sundries. Rocky Mountain Chocolate Factory, Inc. was founded in 1981 and is headquartered in Durango, Colorado.

About Yum! Brands

Yum! Brands, Inc., together with its subsidiaries, develops, operates, and franchises quick service restaurants worldwide. The company operates through the KFC Division, the Taco Bell Division, the Pizza Hut Division, and the Habit Burger Grill Division segments. It also operates restaurants under the KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill brands, which specialize in chicken, pizza, made-to-order chargrilled burgers, sandwiches, Mexican-style food categories, and other food products. The company was formerly known as TRICON Global Restaurants, Inc. and changed its name to Yum! Brands, Inc. in May 2002. Yum! Brands, Inc. was incorporated in 1997 and is headquartered in Louisville, Kentucky.