One Reason Shake Shack (SHAK) Stock Closed Down Today
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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