One Reason Shake Shack (SHAK) Stock Closed Down Today

Shake Shack (SHAK) stock closed lower on Friday despite yesterday's earnings beat, as shares of the company appear fully priced.
By Rachel Graf ,

NEW YORK (TheStreet) -- Shake Shack (SHAK) - Get Report stock closed down by 1.94% to $50.01 on Friday afternoon, despite yesterday's earnings beat, as shares might be fully priced.

JPMorgan values the brand based not only on its revenue base but a mix between its "aggressive" and "base" scenarios, the firm said in a note, Barron's reports.

The "aggressive" scenario includes upwards of 20% compound annual growth rate, 2% traffic growth and store-level margins up more than 30%, whereas the firm's "base" scenario includes a mid-teens unit compound annual growth rate and 1% traffic growth, JPMorgan notes, according to Barron's.

Ten basis points of annual restaurant level margin improvement from JPMorgan's base 2019 through 2030 would enable earnings of $4 per share to $8 per share, the firm adds, Barron's notes. Applying a multiple ranging from 22 to 25x, based off peers' growth, adding the value of cash, and discounting at 10% to December 2016 implies a stock value of $30 per share to $62 per share.

Additionally, on Thursday Shake Shack posted 2015 third quarter adjusted earnings of 12 cents per share on revenue of $53.27 million. Analysts had forecast for earnings of 7 cents per share on revenue of $47.46 million. 

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