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Company Overview: Shake Shack, Inc. (NYSE: SHAK) is a modern-day "roadside" burger stand that serves quality burgers, chicken sandwiches, hot dogs, crinkle-cut fries, shakes, frozen custard, beer, and wine from the classic American menu. As of June 30, 2021, the company had 339 shacks operating globally, of which 200 were domestic company-operated, 23 were domestic licensed, and 116 were foreign licensed. SHAK makes money by selling food, beverages, and branded items at domestic locations and by charging licensing, opening, and territory fees for licensed shacks.
SHAK Details
Key Takeaways from Q2FY21 (ended June 30, 2021)
Revenues & Gross Profit Key Highlights; Analysis by Kalkine Group
Recent Developments
Other Key Findings in Q2FY21
Balance Sheet & Liquidity Position
Key Metrics: SHAK's EBITDA and operating margins rose considerably in Q2FY21, to 9.8% and 1.8%, respectively, compared to -12.5% and -26.2% in Q2FY20. As of June 30, 2021, it had a Debt/Equity Ratio of 0.60x, compared to the industry median of 1.03x.
Profitability Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 64.0% of the total shareholding, while the top 4 constitute the maximum holding. BlackRock Institutional Trust Co., N.A., and Fred Alger Management, LLC, hold the maximum stake in the company at 14.55% and 11.62%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis:
Outlook:
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the past six months, SHAK corrected ~29.36%. The stock is currently trading below the mid-point of its 52-week range of USD 63.49 to USD 138.38. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of high teens (in percentage terms). We believe that the company can trade at a slight discount to its peer's average, considering the dependence of few suppliers, geographic concentration and intense competition. We have taken peers like The Wendy's Company (NASDAQ: WEN) and Papa John's International, Inc. (NASDAQ: PZZA). Considering the significant increase in top and bottom-line performance, strategic expansion plans, improvement in average weekly sales, encouraging outlook, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 79.66, down ~2.45% as of September 29, 2021.
SHAK Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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