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Shake Shack (NYSE:), the American fast-casual restaurant chain, has reported a return on capital employed (ROCE) of just 0.3%, significantly lagging behind the hospitality industry average of 8.9%. The company’s earnings before interest and taxes (EBIT) are at $3.7 million against net total assets worth $1.44 billion—calculated from total assets of $1.6 billion minus current liabilities of $152 million—over the trailing twelve months up to September 2023.
Despite the low ROCE indicating potential inefficiency in its use of capital, Shake Shack is actively reinvesting in the business, which is evident from its increasing revenues and asset base. Over the past five years, shareholders have experienced a gain of 12%, signaling some level of market confidence in the company’s growth-focused reinvestment strategies.
Investors considering Shake Shack should look at analyst forecasts for a deeper insight into the company’s investment potential, as these projections are based on current market trends and Shake Shack’s past performance.
InvestingPro Insights
Shake Shack’s journey in the fast-casual dining sector is marked by its strategic investments and growth initiatives. According to InvestingPro data, Shake Shack has a market capitalization of $2.64 billion and has achieved a notable revenue growth of 20.18% over the last twelve months as of Q3 2023. This is complemented by a quarterly revenue growth of 21.24% in Q3 2023, underscoring the company’s ability to expand its income streams amidst a competitive landscape.
InvestingPro Tips reveal that Shake Shack is poised for net income growth this year, a positive sign for potential investors. Additionally, the company’s liquid assets surpass its short-term obligations, indicating a solid liquidity position that can support ongoing operations and investment opportunities. However, it’s worth noting that the stock is currently trading at a high earnings multiple, which suggests that the market has high expectations for the company’s future earnings.
For investors seeking more comprehensive analysis and insights, InvestingPro offers additional tips on Shake Shack, with the platform currently featuring a special Black Friday sale, offering up to 55% off on subscriptions. Subscribers can access a total of 13 InvestingPro Tips, providing a more in-depth understanding of Shake Shack’s financial health and investment prospects.
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