Why Shake Shack Inc. Stock Jumped 10% in March
What: Burger joint Shake Shack's stock rose 10% during the month of March, according to S&P Capital IQ data. That bounce put shares at over $50 each, compared to the pricing of its initial public offering in February of $21 per share. The stock doubled that mark within the first day of trading.
So what: The big news in March was Shake Shack's fourth-quarter results that showed solid growth in the young restaurant business. Comparable-store sales jumped higher by 7%, putting it well ahead of fast -ood rivals including McDonald's and Burger King. Meanwhile, a quickly growing footprint of burger locations pushed Shake Shack's overall revenue up by 52%.
The fourth-quarter news wasn't all good for investors, though. Profit margin shrank on account of rising beef costs. And weekly average sales dipped due to the company's growth into less densely populated areas.
Now what: Wall Street expects Shake Shack to post a 40% sales gain this year without booking much in terms of earnings. Over the long term, management believes the concept can support up to 450 locations in the United States, up from just 31 restaurants as of the end of 2014. That means this growth story is far from over. Still, investors might be turned off by the company's steep valuation. Shake Shack is priced at a whopping 10 times annual sales, as compared to Chipotle's5 times and Panera Bread's2 times sales multiple.
The article Why Shake Shack Inc. Stock Jumped 10% in March originally appeared on Fool.com.
Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool recommends Chipotle Mexican Grill, McDonald's, and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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