Shake Shack (SHAK), Why Is It Drawing Fresh Attention Today?

Latin American expansion puts Shake Shack in focus

Shake Shack (SHAK) is pushing deeper into Latin America, with plans to enter Brazil through a new licensing deal with Bold Hospitality Company following its seven-year run in Mexico and upcoming launch in Panama.

Shake Shack’s Latin American push is landing at a moment when its share price has been volatile. The stock has a 30 day share price return of 27.53% and a 90 day gain of 22.85%, yet the 1 year total shareholder return has declined 24.08%, hinting that recent enthusiasm is still rebuilding confidence after a tougher stretch for longer term holders.

Scan how Shake Shack’s Latin American push compares with other consumer stocks showing fresh momentum through our hand picked 20 high quality undiscovered gems.

Shake Shack looks like a growing global burger brand on one side and a stock that has surged 27.53% over 30 days after a tougher 1 year stretch on the other side. Is that current enthusiasm still giving you a reasonable entry on price?

Most Popular Narrative: 14% Undervalued

Shake Shack’s most followed valuation story pegs fair value at $81.38, above the recent $69.99 close. This frames the current Latin American expansion against a stock the narrative treats as discounted.

The focus on urban expansion and faster roll out of both domestic company-operated Shacks and international licensed locations, including new formats such as drive thrus and smaller footprints, is being backed by reduced build costs to under $2 million per unit and over 30% cash on cash returns on recent openings, which can support system wide revenue growth and improving earnings.

See why 15 investors see Shake Shack as 14% undervalued.

Result: Fair Value of $81.38 (UNDERVALUED)

Still, the Shake Shack story can break if beef and operating costs continue to pressure restaurant margins, or if heavy tech and marketing spend fails to lift profitability.

Find out about the key risks to this Shake Shack narrative.

Another View On Shake Shack’s Valuation

Analyst narratives reference a fair value of $81.38, while the market is already treating Shake Shack as a premium story. The stock trades on a P/E of 71.2x, compared with 19.6x for the US Hospitality group and a fair ratio estimate of 22.5x. That gap points to richer sentiment than the initial valuation suggests. Where do you think the adjustment comes from if expectations cool?

See what the numbers indicate about this price in our valuation breakdown through the See what the numbers say about this price — find out in our valuation breakdown..

Next Steps

All this optimism around Shake Shack is one side of the story, and the other side is the data you can inspect yourself. To see why some investors still point to potential upsides, review the 3 key rewards.

Looking for more Shake Shack investment ideas?

Shake Shack might be front of mind today, but your next strong idea could sit in a very different corner of the market, so give yourself options.

• Target quality at a discount by scanning companies that screen well on both fundamentals and value through the 33 high quality undervalued stocks.
• Lock in income potential by reviewing businesses with resilient cash flows and yields through the 8 dividend fortresses.
• Limit unwanted surprises by focusing on businesses with resilient financial profiles and lower risk scores through the 32 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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