Founded in 2004, Shake Shack Inc. (SHAK) is one of the fastest-growing casual restaurant chains, operating in the United States and internationally. The company offers hamburgers, hot dogs, chicken, crinkle-cut fries, shakes, and other products.
The company expects to open a total of 35 to 40 domestic company-operated Shacks in 2021. Additionally, it is focused on introducing new menu innovations throughout this year to further enhance customer experience and accelerate growth. Even though the pandemic upended its sales last year, the company’s expansion plans and its focus on boosting sales through app deliveries make it a top pick in the restaurant space.
SHAK’s focus on innovation and its strategic investments across app channels has allowed it to gain 62.6% over the past year. This impressive performance combined with several other factors has helped SHAK earn a “Strong Buy” rating in our proprietary rating system.
Here’s how our proprietary POWR Ratings system evaluates SHAK:
Trade Grade: A
SHAK is currently trading above its 50-day and 200-day moving averages of $85.32 and $63.97, respectively, indicating that the stock is in an uptrend. Also, the stock gained 56.9%, over the past three months, reflecting a solid short-term bullishness.
SHAK’s revenue increased 4% year-over-year to $157.5 million in the fiscal fourth quarter ended December 30, 2020. Shack sales rose 4.6% from the year-ago value to $152.5 million, while average weekly sales grew 6.9% sequentially to $62,000 over this period.
The company’s CEO, Randi Garutti, has recently said in an interview that the pandemic has created an opportunity for the burger chain to expand its business in the suburban areas and accelerate its digital plans to respond to how consumers order and eat their burgers. SHAK also plans to unveil new restaurant designs which could help it to appeal to suburban customers.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, SHAK is pretty well-positioned. The stock is currently trading just 4.6% below its 52-week high of $116.65, which it hit on January 15th.
The company’s net revenue grew at a CAGR of 15.4% over the past three years, while total assets grew at a CAGR of 23.8% over this period. This can be attributed to the expanded digital capabilities and continued growth in Shack sales.
Peer Grade: A
SHAK is currently ranked #7 out of 48 stocks in the Restaurant industry. Other popular stocks in this industry are Starbucks Corporation (SBUX), Yum! Brands, Inc. (YUM) and Darden Restaurants, Inc. (DRI)
YUM, DRI and SBUX gained 5.3%, 8.8%, and 11.8% over the past year, respectively. This compares to SHAK’s 62.6% returns over this period.
Industry Rank: B
The Restaurant industry is ranked #47 out of the 123 StockNews.com industries. The companies in this industry own and operate restaurants and other fast-food joints, including full-service restaurants, quick-service restaurants, and buffets.
Earlier last year, the industry bore the brunt of the transaction declines amid the shelter-at-home and restaurant dine-in closure mandates imposed as a result of the pandemic. However, many full-service restaurant chains quickly pivoted to offer more off-premises services by offering curbside pick-up and enhancing their delivery options. With delivery and drive-thru orders soaring as more consumers look for relief from preparing most of their meals at home, the industry is expected to remain resilient and consumer demand is expected to remain strong, going forward.
Overall POWR Rating: A (Strong Buy)
SHAK is rated “Strong Buy” due to its impressive financials, short-and-long-term bullishness, and underlying industry strength, as determined by the four components of our overall POWR Rating.
Despite gaining 62.6% over the past year, SHAK’s strategic moves make it the best choice in the restaurant space. With delivery and drive-thru sales growing more than ever, SHAK is expected to witness substantial revenue growth in the upcoming quarters.
The consensus EPS estimate for the current year indicates a 133.3% improvement year-over-year. The consensus revenue estimate of $735.74 million for 2021 represents a 41.2% increase from the same period last year.
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SHAK shares were trading at $113.17 per share on Tuesday morning, up $1.91 (+1.72%). Year-to-date, SHAK has gained 33.49%, versus a 1.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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