Chipotle Vs. Shake Shack: Which Fast Casual Restaurant Stock Is A Better Buy?

As of December 30, 2020, SHAK’s total assets increased 18.3% year-over-year to $1.15 billion and the company had cash and cash equivalents of $146.87 million.

Past and Expected Financial Performance

CMG’s revenue and total assets grew at CAGRs of 10.2% and 43%, respectively, over the past three years. The CAGR of the company’s EBITDA has been 8.1% over the past three years.

Analysts expect CMG’s revenue to increase 37.7% in the current quarter (ending June 30, 2021), 21.7% in the current year, and 12.6% next year. Its EPS is expected to grow 1440% in the current quarter, 120.1% in the current year, and 31.8% next year. CMG’s EPS is expected to grow at a rate of 52.8% per annum over the next five years.

In comparison, SHAK’s revenue and total assets grew at CAGRs of 13.4% and 34.5%, respectively, over the past three years. The CAGR of the company’s EBITDA has been negative over the past three years.

Analysts expect SHAK’s revenue to increase 95.2% in the current quarter (ending June 30, 2021), 41.3% in the current year, and 28% next year. However, its EPS is expected to increase 111.1% in the current quarter, 112.5% in the current year, and 714.3% next year. Unfortunately, its EPS is expected to decline at a rate of 6.1% per annum over the next five years.

Profitability

CMG’s trailing-12-month revenue is 11.4 times SHAK’s. CMG is also more profitable, with a gross profit margin of 34.6% versus SHAK’s 30.8%.

However, CMG’s ROE of 19.2% and ROA of 3.7% compare favorably with SHAK’s negative values.

Valuation

In terms of forward non-GAAP P/E, SHAK is currently trading at 2632.50x, 3892.9% higher than CMG, which is currently trading at 65.93x. Also, in terms of forward non-GAAP PEG, SHAK’s 131.62x is 4013.1% higher than CMG’s 3.20x. Also, CMG’s forward EV/EBITDA of 39.77x is significantly lower than SHAK’s 62.50x.

Thus, CMG looks more affordable here.

POWR Ratings

While SHAK has an overall D rating, which translates to Sell in our proprietary POWR Ratings system, CMG has an overall B rating, which equates to a Buy.

Both CMG and SHAK have a Momentum Grade of C, due to their mixed price performance. However, in terms of Value Grade, CMG has been graded a C, given its marginally higher valuation compared to its peers. In comparison, SHAK’s Value Grade of D signifies its overvaluation.

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Alpha Stockman 1 month ago Member's comment

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