Yum Brands vs Restaurant Brands International: a valuation and pairs trade comparison
Yum Brands vs Restaurant Brands International: a valuation and pairs trade comparison
On the numbers, Restaurant Brands International (QSR) looks cheaper than Yum! Brands (YUM). Trailing P/E is almost identical, at 17.2x for YUM and 17.5x for QSR. The gap opens on forward earnings and cash returns. Prices are as of Oct 7, 2026, 1:13 PM EDT. Valuation figures are as of Jun 30, 2026, except fair value and beta, which carry the Oct 7 stamp.
Yum! Brands (YUM): Trading at $140.12 (Market Cap: $38.16B) || Forward P/E 21.9x || EV/EBITDA 16.6x || FCF yield 4.4% || Dividend yield 2.1%
Restaurant Brands International (QSR): Trading at $69.99 (Market Cap: $31.92B) || Forward P/E 13.2x || EV/EBITDA 13.9x || FCF yield 5.0% || Dividend yield 3.7%
Where the Gap Shows
| Metric | YUM | QSR | Take |
|---|---|---|---|
| Fair value upside | 2.2% ($143.27) | 15.3% ($80.73) | QSR has more room to its estimate |
| Forward P/E | 21.9x | 13.2x | The market expects QSR earnings to grow |
| 1-year return | -2.8% | 8.2% | QSR has stronger momentum |
| Debt/equity | Negative (-188.7%) | 406.5% | Both carry heavy leverage |
| Beta | 0.55 | 0.54 | Similar market sensitivity |
The catch: QSR’s cheapness comes with strain. Its gross margin fell from 41.4% to 33.8% over five years. Revenue still grew faster, rising from $5.74B to $9.43B against YUM’s $6.58B to $8.21B. YUM’s margin also slipped, from 48.1% to 46.2%, but it remains far higher. YUM’s negative equity reflects buybacks, so its leverage ratio isn’t comparable to QSR’s.
Bottom line: QSR is the better value on every measure here. YUM is the higher-quality, higher-margin business, and it trades at a premium for that.
Pairs Trade Framework
This is an educational framework, not a recommendation. The relative-value idea would be long QSR and short YUM, in roughly equal dollar amounts. It bets that the valuation gap narrows.
- Why it could work: The betas are nearly identical (0.54 vs 0.55). That helps hedge out market and sector moves. The valuation spread is also wide, at 13.2x against 21.9x forward P/E.
- Entry timing: The technicals are mixed. QSR is weak, with RSI at 32.6 (oversold-leaning), MACD negative, and the price below all its major moving averages. YUM is below its 50-, 100- and 200-day averages but has bounced short term. Its Stochastic RSI is overbought at 89.9. That setup fits the trade’s direction, but QSR’s downtrend (ADX 25.5, a moderately strong trend) is still in force.
- Sizing: Match dollar exposure. Alternatively, size by ATR (average daily range). QSR’s is $1.50 on a $70 price. YUM’s is $3.08 on a $140 price. Both are about 2.2% of price, so equal dollars gives similar risk.
- Risks: QSR’s margin erosion may justify its discount, which would mean no convergence. Its leverage adds earnings risk. The short leg also carries YUM’s dividend (2.1%), while the QSR long earns 3.7%. That gives the pair a positive carry of about 1.6 points a year.
- Exits: Track the ratio of QSR to YUM prices, which is currently about 0.50. Define the spread’s historical range and a stop for a widening spread before entering. Earnings dates are the main event risk for both legs.
What to Verify
Before using this, check the historical price ratio, borrow costs for the short, and the next earnings dates for both names.
Historical data is limited to 10 years on Pro+ plan.