Shake Shack Inc. (NYSE: SHAK)

Sector: Consumer Cyclical Industry: Restaurants CIK: 0001620533
Market Cap 3.38 Bn
P/B 6.65
P/E 79.39
P/S 2.46
ROIC (Qtr) 2.52
Div Yield % 0.00
Rev 1y % (Qtr) 15.93
Total Debt (Qtr) 848.39 Mn
Debt/Equity (Qtr) 1.67

About

Shake Shack Inc., a Delaware corporation, operates under the ticker symbol SHAK in the fast-casual restaurant industry. The company has garnered a reputation for its made-to-order Angus beef burgers, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more. Shake Shack's commitment to crafting uplifting experiences and its fine-dining roots have propelled it to cult-brand status. The company's primary business activities include operating restaurants, offering a variety of menu items, and providing a unique dining experience...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 357.76M provide 5.90x coverage of short-term debt 60.67M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 204.30M provides exceptional 59.46x coverage of minority interest expenses 3.44M, showing strong core operations.
  • Operating cash flow of 204.30M provides strong 11.01x coverage of stock compensation 18.55M, indicating sustainable incentive practices.
  • Operating cash flow of 204.30M provides exceptional 96.05x coverage of interest expenses 2.13M, showing strong debt service capability.
  • Cash position of 357.76M provides exceptional 104.12x coverage of minority interest expenses 3.44M, indicating strong liquidity.

Bear case

  • Operating cash flow of 204.30M barely covers its investment activities of (141.40M), with a coverage ratio of -1.44, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • High receivables of 20.61M relative to inventory of 6.31M (3.27 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of 62.91M provides weak coverage of capital expenditures of 141.40M, with a 0.44 ratio suggesting additional external financing needs for growth initiatives.
  • Operating earnings of 62.70M show weak coverage of depreciation charges of 192.65M, with a 0.33 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 192.65M relative to operating cash flow of 204.30M, which is 0.94x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Restaurants
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MCD Mcdonalds Corp 222.05 Bn 26.39 8.45 55.82 Bn
2 SBUX Starbucks Corp 95.51 Bn 51.45 2.57 26.61 Bn
3 CMG Chipotle Mexican Grill Inc 50.94 Bn 33.15 4.32 4.98 Bn
4 YUM Yum Brands Inc 43.17 Bn 29.83 5.36 11.55 Bn
5 QSR Restaurant Brands International Inc. 22.43 Bn 24.33 2.42 15.64 Bn
6 DRI Darden Restaurants Inc 21.91 Bn 19.91 1.77 6.16 Bn
7 YUMC Yum China Holdings, Inc. 18.12 Bn 20.05 1.57 1.84 Bn
8 DPZ Dominos Pizza Inc 14.57 Bn 24.72 3.01 5.05 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.12 2.05
EV to Cash from Ops. EV/CFO 18.98 16.57
EV to Debt EV to Debt 4.57 4.75
EV to EBIT EV/EBIT 61.85 3.45
EV to EBITDA EV/EBITDA 15.72 9.76
EV to Free Cash Flow [EV/FCF] EV/FCF 61.65 29.06
EV to Market Cap EV to Market Cap 1.15 6.55
EV to Revenue EV/Rev 2.82 2.40
Price to Book Value [P/B] P/B 6.65 -1.40
Price to Earnings [P/E] P/E 79.39 13.35
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -9.56
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 18.72
Dividend per Basic Share Div per Share (Qtr) 0.00 0.84
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 30.41
Interest Coverage Int. cover (Qtr) 29.48 -86.85
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -5.57 -24.56
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 15.08 35.50
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.72
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 193.80 -564.81
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 44.84 25.78
EBIT Growth (1y) % EBIT 1y % (Qtr) 1,207.95 -507.68
EBT Growth (1y) % EBT 1y % (Qtr) 2,075.08 -41.98
EPS Growth (1y) % EPS 1y % (Qtr) 409.52 -126.51
FCF Growth (1y) % FCF 1y % (Qtr) 86.75 5,724.78
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 13.85 23.70
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.75 0.99
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.07
Cash Ratio Cash Ratio (Qtr) 1.59 0.78
Current Ratio Curr Ratio (Qtr) 1.84 1.47
Debt to Equity Ratio Debt/Equity (Qtr) 1.67 0.05
Interest Cover Ratio Int Coverage (Qtr) 29.48 -86.85
Times Interest Earned Times Interest Earned (Qtr) 29.48 -86.85
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 18.60 7.71
EBIT Margin % EBIT Margin % (Qtr) 4.57 -2.27
EBT Margin % EBT Margin % (Qtr) 4.41 -1.97
Gross Margin % Gross Margin % (Qtr) 65.30 34.04
Net Profit Margin % Net Margin % (Qtr) 3.10 -3.69