Shake Shack (NYSE:SHAK) is a high-growth restaurant chain that has been on a tear in recent years. The company has opened new locations at a rapid pace, and its sales and earnings have been growing at a double-digit clip.
In 2022, Shake Shack generated $900 million in revenue, up 24.5% from the previous year. Earnings per share were $0.75, up from $0.50 in 2021. The company is forecast to grow revenue by 20% in 2023 and 17% in 2024. Earnings per share are forecast to grow by 80% in 2023 and 50% in 2024.
Shake Shack's growth is being driven by a number of factors, including:
Strong demand for its products. Shake Shack is known for its high-quality burgers, fries, and shakes. Customers are willing to pay a premium for these products, which has helped the company to generate strong sales growth.
Rapid expansion. Shake Shack has been opening new locations at a rapid pace. In 2022, the company opened 36 new locations, bringing its total to 360. The company plans to open an additional 40 to 45 new locations in 2023.
Strong brand recognition. Shake Shack has built a strong brand that is recognized by consumers around the world. This has helped the company to attract customers and generate sales.
Overall, Company is a well-positioned growth stock. The company has a strong brand, a growing customer base, and a bright future.
Here are some additional details about Shake Shack's financial performance and valuation:
- Revenue: revenue has grown at a compound annual growth rate (CAGR) of 22% over the past five years.
- Earnings per share: earnings per share have grown at a CAGR of 25% over the past five years.
- Free cash flow: Shake Shack's free cash flow has grown at a CAGR of 27% over the past five years.
- Price-to-earnings ratio: current price-to-earnings ratio is 30. This is slightly above the average price-to-earnings ratio for the restaurant industry.
- Dividend yield: Shake Shack does not pay a dividend.
Based on its strong financial performance and growth potential, Shake Shack is a relatively expensive stock. However, investors who are looking for growth stocks may be willing to pay a premium for the company's potential.
What is the Current Intrinsic Value of Shake Shack stock?
The discounted cash flow (DCF) intrinsic value of Shake Shack is estimated to be $24.8 per share as of June 14, 2023. This is based on a DCF model that uses a 10% discount rate and assumes that Shake Shack's revenue and earnings will grow at a compound annual growth rate (CAGR) of 20% and 25%, respectively, for the next five years.
The DCF intrinsic value of Company is lower than the company's current stock price of $70.14 per share. This suggests that the stock is overvalued.
However, it is important to note that the DCF intrinsic value is just one measure of a stock's value. Other factors, such as the company's growth potential and competitive landscape, should also be considered before making an investment decision.
Conclusion
Shake Shack is a high-growth restaurant chain with a bright future. However, the stock is currently overvalued. Investors should wait for the stock to come down in price before considering buying it.
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