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Shake Shack, Inc. (SHAK) Hits Fresh High: Is There Still Room to Run?

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Have you been paying attention to shares of Shake Shack (SHAK - Free Report) ? Shares have been on the move with the stock up 3.1% over the past month. The stock hit a new 52-week high of $111.29 in the previous session. Shake Shack has gained 42.5% since the start of the year compared to the 10.2% move for the Zacks Retail-Wholesale sector and the -1.6% return for the Zacks Retail - Restaurants industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 2, 2024, Shake Shack reported EPS of $0.13 versus consensus estimate of $0.1 while it beat the consensus revenue estimate by 2.3%.

For the current fiscal year, Shake Shack is expected to post earnings of $0.73 per share on $1.25 billion in revenues. This represents a 97.3% change in EPS on a 14.48% change in revenues. For the next fiscal year, the company is expected to earn $1.02 per share on $1.44 billion in revenues. This represents a year-over-year change of 39.85% and 15.41%, respectively.

Valuation Metrics

Shake Shack may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Shake Shack has a Value Score of F. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 144.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 20.1X. On a trailing cash flow basis, the stock currently trades at 40.5X versus its peer group's average of 10.1X. Additionally, the stock has a PEG ratio of 5.32. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Shake Shack currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Shake Shack passes the test. Thus, it seems as though Shake Shack shares could still be poised for more gains ahead.

How Does SHAK Stack Up to the Competition?

Shares of SHAK have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Brinker International, Inc. (EAT - Free Report) . EAT has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of B.

Earnings were strong last quarter. Brinker International, Inc. beat our consensus estimate by 7.83%, and for the current fiscal year, EAT is expected to post earnings of $4.34 per share on revenue of $4.34 billion.

Shares of Brinker International, Inc. have gained 19.4% over the past month, and currently trade at a forward P/E of 14.71X and a P/CF of 8.67X.

The Retail - Restaurants industry is in the top 38% of all the industries we have in our universe, so it looks like there are some nice tailwinds for SHAK and EAT, even beyond their own solid fundamental situation.

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