Yum Brands vs Restaurant Brands International: a valuation and pairs trade comparison

Restaurant Brands International (QSR) appears to be the more affordable option when compared to Yum! Brands (YUM). Both companies have a similar trailing price-to-earnings (P/E) ratio, at 17.2x for YUM and 17.5x for QSR, as of October 7, 2026. However, the gap widens when looking at forward earnings and cash returns. As of June 30, 2026, QSR is trading at $69.99 with a market capitalization of $31.92 billion, while YUM is priced at $140.12 with a market cap of $38.16 billion.

QSR's valuation appears attractive, but there are some concerns. Its gross margin has declined from 41.4% to 33.8% over five years, although revenue growth has outpaced YUM's from $5.74 billion to $9.43 billion, compared to YUM's growth from $6.58 billion to $8.21 billion. Despite the margin decline, YUM maintains a significantly higher gross margin than QSR. Additionally, YUM's equity is affected by buybacks, making its leverage ratio different from QSR's.

In conclusion, QSR is the more cost-effective choice based on the presented data. YUM is seen as a higher-quality, higher-margin business with a premium valuation. This analysis serves an educational purpose and should not be considered a recommendation. To implement a relative-value strategy, one could consider a long position in QSR and a short position in YUM, ideally in equal dollar amounts.

Before proceeding with this strategy, it is essential to examine the historical price ratio, borrowing costs for the short position, and the upcoming earnings dates for both companies.