Shake Shack – Intrinsic Value of Stock
“We are on an endless pursuit to create uplifting experiences.” – Shake Shack’s Mission Statement
One of the members of the informal eating out industry, a.k.a. fast-food restaurants, is Shake Shack. Shake Shack is one of the few fast-food restaurants that sells beer and wine at a limited number of its locations. The company is relatively young by any business standard opening its first restaurant back in 2001 and going public in 2014. Thus, the company does not qualify as a value investment opportunity but is used as a comparative tool with this site’s Value Investment Fund’s Fast-Food Restaurants’ Pool.
In general, Shake Shack’s market price is several times greater than the company’s intrinsic value. It is trading at this high price purely on conjecture that it will morph into the next McDonald’s. Based on its business plan, historical earnings, and capital raising capacity; it will take every bit of twenty (20) years to justify the current market price – trading at more than $70 per share (November 2021). No value investor in their right mind would spend $70 plus on hope. It is simply irresponsible.
To make matters worse, Shake Shack is not following the industry financial model.
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