Shake Shack Inc. SHAK managed to hit an all-time high of $53.90 as of Monday, Apr 13, 2015. Shares of this burger chain have reportedly been able to surpass all price targets set by major investment firms. In the absence of any major development related to the company, let us analyze the journey of the stock and the factors that helped it to reach this level.
Shake Shack, the New York City-based purveyor of burgers, crinkle-cut fries and custard shakes, began trading in Jan 2015. The shares, which the company had priced at $21, opened at $47.21 on its debut and the company hit a high of $52.50 during the day. Its price eventually settled 119% above the initial public offering price, closing at $45.90. However, over the next few days, the stock hit an all-time low of $38.63 on Feb 17.
Investors were cautious about the stock then. However, the company has continued to expand to various locations domestically as well as internationally. Meanwhile, the company posted better-than-expected fourth quarter 2014 results in March – its first results since the initial public offering.
The company’s adjusted loss of 1 cent per share was narrower than the Zacks Consensus Estimate of a loss of 3 cents, mainly due to a rise in revenues. Revenues grew 51.5% year over year to $34.8 million and beat the consensus mark by 5.62% driven by higher comps and unit growth. Comps grew 7.2% year over year, better than the prior-year quarter growth of 6.8%.
During the earnings call, the company stated that it expects total revenue in the range of $159 million and $163 million in 2015 that translates to a price-to-sales ratio of 11.47 to 11.76. Meanwhile, the company also stated that at least 10 new domestic company-operated outlets and at least five international licensed outlets will be opened under its current license agreements in the U.K. and Middle East this year.
Investors seem to be impressed by this strategy of the Zacks Rank #3 (Hold) company and believe that its expansion into various cities around the world would aid comps, going forward.
Shake Shack is positioned well to cash in on an attractive segment of the U.S. fast-casual market and increase its earnings with lucrative store economics, a strong brand portfolio and a solid balance sheet. The company has an Earnings ESP of 0.00%.
Some other restaurant stocks that debuted on the stock market in the recent past include El Pollo Loco Holdings, Inc. LOCO, The Habit Restaurants, Inc. HABT and Potbelly Corp. PBPB.
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