Head-To-Head Comparison: Domino’s Pizza (NASDAQ:DPZ) & Yum China (NYSE:YUMC)

Yum China (NYSE:YUMC) and Domino’s Pizza (NASDAQ:DPZ) are both large-cap retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, risk, valuation, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

85.6% of Yum China shares are held by institutional investors. Comparatively, 94.6% of Domino’s Pizza shares are held by institutional investors. 0.4% of Yum China shares are held by company insiders. Comparatively, 0.8% of Domino’s Pizza shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Yum China and Domino’s Pizza”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Yum China	$11.30 billion	1.49	$911.00 million	$2.41	19.32
Domino’s Pizza	$4.71 billion	3.07	$584.17 million	$17.11	24.96

Yum China has higher revenue and earnings than Domino’s Pizza. Yum China is trading at a lower price-to-earnings ratio than Domino’s Pizza, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Yum China and Domino’s Pizza’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Yum China	7.81%	14.08%	8.19%
Domino’s Pizza	12.16%	-14.91%	33.28%

Volatility and Risk

Yum China has a beta of 0.14, indicating that its stock price is 86% less volatile than the S&P 500. Comparatively, Domino’s Pizza has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for Yum China and Domino’s Pizza, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Yum China	0	1	1	1	3.00
Domino’s Pizza	2	11	12	2	2.52

Yum China presently has a consensus target price of $55.00, suggesting a potential upside of 18.11%. Domino’s Pizza has a consensus target price of $490.40, suggesting a potential upside of 14.83%. Given Yum China’s stronger consensus rating and higher possible upside, equities analysts clearly believe Yum China is more favorable than Domino’s Pizza.

Dividends

Yum China pays an annual dividend of $0.96 per share and has a dividend yield of 2.1%. Domino’s Pizza pays an annual dividend of $6.96 per share and has a dividend yield of 1.6%. Yum China pays out 39.8% of its earnings in the form of a dividend. Domino’s Pizza pays out 40.7% 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 China has raised its dividend for 5 consecutive years and Domino’s Pizza has raised its dividend for 12 consecutive years. Yum China is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Domino’s Pizza beats Yum China on 11 of the 18 factors compared between the two stocks.

About Yum China

Yum China Holdings, Inc. owns, operates, and franchises restaurants in the People's Republic of China. The company operates through KFC, Pizza Hut, and All Other segments. It operates restaurants under the KFC, Pizza Hut, Taco Bell, Lavazza, Little Sheep, and Huang Ji Huang concepts. The company also operates V-Gold Mall, a mobile e-commerce platform to sell products; and offers online food deliver services. Yum China Holdings, Inc. was founded in 1987 and is headquartered in Shanghai, the People's Republic of China.

About Domino’s Pizza

Domino’s Pizza, Inc., through its subsidiaries, operates as a pizza company in the United States and internationally. The company operates through three segments: U.S. Stores, International Franchise, and Supply Chain. It offers pizzas under the Domino’s brand name through company-owned and franchised stores. It also provides oven-baked sandwiches, pastas, boneless chicken and chicken wings, breads and dips, desserts, and soft drink products, as well as loaded tots and pepperoni stuffed cheesy breads. Domino’s Pizza, Inc. was founded in 1960 and is headquartered in Ann Arbor, Michigan.