Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
YUM! Brands Inc., profitability ratios
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
Profitability metrics between 2011 and 2015 exhibit a pattern of moderate volatility, characterized by a performance peak in 2012, a subsequent decline through 2014, and a recovery in 2015. The correlation between operating and net margins suggests that the fluctuations were primarily driven by operational efficiency and cost management rather than non-operating factors.
- Profit Margin Trends
- The operating profit margin peaked at 16.83% in 2012 before experiencing a steady decline to a period low of 11.73% in 2014. A recovery followed in 2015, with the margin rising to 14.66%. Net profit margins mirrored this trajectory, peaking at 11.71% in 2012 and reaching a trough of 7.91% in 2014, before rebounding to 9.87% by the end of the period.
- Asset Utilization
- Return on assets (ROA) showed similar fluctuations, reaching a high of 17.72% in 2012. Following this peak, ROA stabilized between 12.55% and 12.59% during 2013 and 2014, eventually recovering to 16.01% in 2015, indicating a return toward higher asset productivity.
- Equity Returns and Leverage
- Return on equity (ROE) displayed the most significant volatility of all analyzed ratios. After remaining relatively stable between 2011 and 2012, ROE dropped to 50.37% in 2013. However, a substantial escalation occurred by 2015, where ROE reached 141.93%. This sharp increase in ROE, which far outpaced the growth in ROA and net margins during the same period, suggests a significant reduction in shareholders' equity or an increase in financial leverage.
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Operating Profit Margin
YUM! Brands Inc., operating profit margin calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating profit | 1,921) | 1,557) | 1,798) | 2,294) | 1,815) | |
| Revenues | 13,105) | 13,279) | 13,084) | 13,633) | 12,626) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 14.66% | 11.73% | 13.74% | 16.83% | 14.38% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Operating profit margin = 100 × Operating profit ÷ Revenues
= 100 × 1,921 ÷ 13,105 = 14.66%
2 Click competitor name to see calculations.
The operating performance from 2011 to 2015 is characterized by significant volatility in profitability margins, with a distinct peak in 2012 followed by a contraction and a subsequent recovery in 2015.
- Operating Profit Margin Trends
- The operating profit margin peaked at 16.83% in 2012, coinciding with the highest recorded revenues of 13,633 million US$ and operating profit of 2,294 million US$. This represents the most efficient period of operation within the analyzed timeframe.
- Margin Contraction Period
- A downward trend occurred between 2012 and 2014, with the margin falling to 13.74% in 2013 and reaching a period low of 11.73% in 2014. Notably, in 2014, operating profit declined to 1,557 million US$ despite a slight increase in revenues, suggesting a rise in operating expenses or a decrease in operational efficiency during that fiscal year.
- Profitability Recovery
- A recovery is observed in 2015, as the operating profit margin rose to 14.66%. This improvement was driven by an increase in operating profit to 1,921 million US$, achieved even as total revenues experienced a marginal decline to 13,105 million US$, indicating improved cost management or a shift in revenue quality.
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Net Profit Margin
YUM! Brands Inc., net profit margin calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income, YUM! Brands, Inc. | 1,293) | 1,051) | 1,091) | 1,597) | 1,319) | |
| Revenues | 13,105) | 13,279) | 13,084) | 13,633) | 12,626) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 9.87% | 7.91% | 8.34% | 11.71% | 10.45% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Net profit margin = 100 × Net income, YUM! Brands, Inc. ÷ Revenues
= 100 × 1,293 ÷ 13,105 = 9.87%
2 Click competitor name to see calculations.
The financial performance from 2011 to 2015 is characterized by volatility in profitability, marked by a peak in 2012 followed by a period of contraction and a subsequent recovery in 2015.
- Revenue and Net Income Correlation
- Revenues reached a peak of 13,633 million USD in 2012, which coincided with the highest reported net income of 1,597 million USD for the period. Following this peak, revenues remained relatively stagnant, fluctuating between 13,084 million USD and 13,279 million USD from 2013 to 2015, while net income showed more significant volatility.
- Net Profit Margin Trajectory
- The net profit margin experienced an initial expansion from 10.45% in 2011 to 11.71% in 2012. A sharp decline followed, with the margin dropping to 8.34% in 2013 and reaching a period low of 7.91% in 2014. A strong recovery was observed in 2015, where the margin returned to 9.87%.
- Operational Efficiency Insights
- A divergence in performance is evident between 2013 and 2014, where a slight increase in revenue was accompanied by a decrease in net income, leading to the erosion of the profit margin. Conversely, the 2015 results indicate an improvement in profitability efficiency; net income increased to 1,293 million USD despite a minor decrease in overall revenue compared to 2014.
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Return on Equity (ROE)
YUM! Brands Inc., ROE calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income, YUM! Brands, Inc. | 1,293) | 1,051) | 1,091) | 1,597) | 1,319) | |
| Shareholders’ equity, YUM! Brands, Inc. | 911) | 1,547) | 2,166) | 2,154) | 1,823) | |
| Profitability Ratio | ||||||
| ROE1 | 141.93% | 67.94% | 50.37% | 74.14% | 72.35% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
ROE = 100 × Net income, YUM! Brands, Inc. ÷ Shareholders’ equity, YUM! Brands, Inc.
= 100 × 1,293 ÷ 911 = 141.93%
2 Click competitor name to see calculations.
The financial performance between 2011 and 2015 is characterized by high but volatile profitability ratios, driven primarily by a significant reduction in the equity base rather than consistent growth in net earnings.
- Net Income Trends
- Net income exhibited a fluctuating pattern over the five-year period. After reaching a peak of 1,597 million US$ in 2012, earnings declined to a low of 1,051 million US$ by 2014. A recovery occurred in 2015, with net income rising to 1,293 million US$.
- Shareholders' Equity Dynamics
- A marked downward trend in shareholders' equity is observed starting after 2013. Equity peaked at 2,166 million US$ in 2013 before declining sharply to 1,547 million US$ in 2014 and further dropping to 911 million US$ by 2015. This represents a reduction of approximately 58% in the equity base between 2013 and 2015.
- Return on Equity (ROE) Interpretation
- The ROE remained exceptionally high throughout the period, though it experienced significant variance. While the ratio fluctuated between 50.37% and 74.14% from 2011 to 2014, it surged to 141.93% in 2015. This dramatic increase is attributed to the simultaneous rise in net income and the substantial contraction of shareholders' equity, which mathematically amplified the return ratio.
The analysis suggests that the surge in ROE toward the end of the period is not a result of operational efficiency gains alone, but is heavily influenced by a leaner capital structure. The inverse relationship between the decreasing equity and the increasing ROE indicates an aggressive approach to equity management.
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Return on Assets (ROA)
YUM! Brands Inc., ROA calculation, comparison to benchmarks
| Dec 26, 2015 | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income, YUM! Brands, Inc. | 1,293) | 1,051) | 1,091) | 1,597) | 1,319) | |
| Total assets | 8,075) | 8,345) | 8,695) | 9,011) | 8,834) | |
| Profitability Ratio | ||||||
| ROA1 | 16.01% | 12.59% | 12.55% | 17.72% | 14.93% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-26), 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
ROA = 100 × Net income, YUM! Brands, Inc. ÷ Total assets
= 100 × 1,293 ÷ 8,075 = 16.01%
2 Click competitor name to see calculations.
The financial performance between 2011 and 2015 exhibits volatility in profitability, with the return on assets (ROA) reflecting fluctuations in both net income and the total asset base.
- Return on Assets Trend
- ROA peaked in 2012 at 17.72% before experiencing a decline in 2013 and 2014, reaching a low of 12.55%. A recovery is observed in 2015, where the ratio rose to 16.01%.
- Net Income Volatility
- Net income demonstrated significant variance, rising from 1,319 million in 2011 to a high of 1,597 million in 2012. A subsequent contraction occurred in 2013 and 2014, with values falling to 1,091 million and 1,051 million respectively, before rebounding to 1,293 million in 2015.
- Asset Base Utilization
- Total assets followed a general downward trajectory after 2012, decreasing from a peak of 9,011 million to 8,075 million by 2015. The increase in ROA observed in 2015 is attributable to the combination of rising net income and a reduced asset base, indicating an improvement in the efficiency of asset utilization to generate earnings.
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