Investment analysis reveals contrasting profiles for two major players in the fast-food industry: Yum! Brands and Shake Shack. As retail and wholesale companies, both present unique investment opportunities, but a deeper dive into their financial metrics shows significant differences in risk, profitability, valuation, and market sentiment.
Volatility and Risk Assessment
When evaluating volatility, Yum! Brands boasts a beta of 0.67, indicating that its stock is approximately 33% less volatile than the S&P 500. In contrast, Shake Shack presents a beta of 1.67, suggesting its share price is about 67% more volatile than the benchmark index. This disparity in volatility can be a crucial factor for investors assessing their risk tolerance.
Financial Performance and Valuation
In terms of revenue and earnings, Yum! Brands significantly outperforms Shake Shack. The company currently reports higher earnings per share (EPS) and operates at a lower price-to-earnings (P/E) ratio, making it the more affordable option for potential investors.
According to data from MarketBeat.com, Yum! Brands has a consensus target price of $167.38, indicating a potential upside of 8.91%. Comparatively, Shake Shack has a target price of $119.10, which translates to a more attractive potential upside of 38.97%. This suggests that analysts view Shake Shack as the more favorable investment, despite Yum! Brands‘s stronger financial foundation.
Profitability metrics further highlight the differences between the two companies. While specific figures were not disclosed, analysts emphasize that Yum! Brands typically maintains superior net margins and returns on equity.
Ownership and Market Sentiment
Institutional ownership plays a significant role in gauging market confidence. Currently, 82.4% of Yum! Brands shares are held by institutional investors, compared to 86.1% for Shake Shack. Insider ownership also varies, with just 0.3% of Yum! Brands shares owned by insiders, while Shake Shack has 8.5% insider ownership. High institutional ownership often reflects a belief in long-term growth potential.
In summary, while Yum! Brands excels in financial strength across several key metrics, Shake Shack offers a more enticing potential return according to analyst recommendations. Of the 15 factors evaluated, Yum! Brands outperformed Shake Shack in 8 categories, which may appeal to conservative investors.
Yum! Brands operates a diverse portfolio of quick-service restaurants including KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill. The company, headquartered in Louisville, Kentucky, was incorporated in 1997 and rebranded from TRICON Global Restaurants, Inc. in May 2002.
Conversely, Shake Shack, founded in 2001 and based in New York, New York, specializes in offering hamburgers, chicken, hot dogs, and a variety of sides and beverages.
Investors should weigh these factors carefully when considering their next investment in the fast-food sector.
