Compare that to McDonald’s Corp. (NYSE: MCD), where the company’s 36,000 stores yield a market cap of around $95 billion and per store value of about $2.6 million. Maybe adding a chicken sandwich to the menu or adding a whole new chain of stores featuring chicken will help Shake Shack grow.
That is what Shake Shack’s valuation is based on: growth. In its initial public offering (IPO) filings, the company said that over the long term it believes it has the potential to grow to a U.S., company-owned total of “at least 450 Shacks” in new and existing markets. That is more than 10 times the number of domestic stores the company claimed at the end of the first quarter. Internationally there are 27 licensed locations.
Shake Shack plans to add at least 10 new U.S. company-owned stores in 2015 and five internationally licensed new stores under existing license agreements in the United Kingdom and the Middle East. The company plans to open 10 new domestic company-owned stores for the foreseeable future. At that rate, even if it adds 10 new international stores annually and begins licensing domestic stores at the rate of 10 per year, the company will not hit 450 stores for more than 10 years. Investors might like a good burger, but they like a good return on investment even more, and now looks like a good time to take some profit on a stock that has been public only since early February.
Including Tuesday’s dip, Shake Shack shares have gained more than 86% since the IPO. Shares traded down about 8% in the noon hour Tuesday, at $85.72 in a post-IPO range of $38.64 to $96.75. The consensus price target is just $45.20.
ALSO READ: The 9 Most Misleading Product Claims
Credit Card Companies Are Doing Something Nuts
Credit card companies are at war. The biggest issuers are handing out free rewards and benefits to win the best customers.
It’s possible to find cards paying unlimited 1.5%, 2%, and even more today. That’s free money for qualified borrowers, and the type of thing that would be crazy to pass up. Those rewards can add up to thousands of dollars every year in free money, and include other benefits as well.
We’ve assembled some of the best credit cards for users today. Don’t miss these offers because they won’t be this good forever.
Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.