Yum! Brands and Shake Shack, both significant players in the retail and wholesale sector, are being evaluated for their investment potential. This analysis contrasts various financial metrics, including risk, analyst recommendations, profitability, valuation, dividends, institutional ownership, and earnings, to determine which company may present a superior investment opportunity.
Volatility and Risk Assessment
Yum! Brands has a beta of 0.67, indicating that its share price is approximately 33% less volatile than the S&P 500. In contrast, Shake Shack, with a beta of 1.67, exhibits a share price volatility that is 67% higher than the S&P 500. This significant difference in volatility suggests that investors in Shake Shack may experience more pronounced fluctuations in their investment compared to those in Yum! Brands.
Valuation and Earnings Insights
A comparative analysis of Yum! Brands and Shake Shack reveals notable differences in revenue and earnings per share (EPS). Yum! Brands reports higher revenue and earnings than Shake Shack, positioning it as a financially stronger entity. Furthermore, Yum! Brands currently trades at a lower price-to-earnings ratio, suggesting it may be the more affordable option for investors seeking value.
According to data from MarketBeat.com, Yum! Brands has a consensus target price of $167.38, indicating a potential upside of 8.91%. Conversely, Shake Shack’s consensus target price stands at $119.10, suggesting a more substantial potential upside of 38.97%. Analysts seem to favor Shake Shack for its higher potential growth.
Profitability metrics reveal that Yum! Brands holds a stronger position in net margins, return on equity, and return on assets compared to Shake Shack. These figures underscore Yum! Brands’ efficiency in generating profit relative to its revenue.
Institutional ownership further differentiates the two companies. Approximately 82.4% of Yum! Brands shares are held by institutional investors, while Shake Shack has even greater institutional backing with 86.1%. Additionally, insider ownership stands at 0.3% for Yum! Brands, contrasting with Shake Shack’s 8.5%. High institutional ownership signals confidence from large investors regarding long-term growth potential.
Company Profiles
Yum! Brands, Inc. is headquartered in Louisville, Kentucky, and operates a range of quick-service restaurant brands, including KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill. The company was originally known as TRICON Global Restaurants, Inc. before rebranding in May 2002.
Shake Shack, founded in 2001 and based in New York, New York, owns and operates a chain of fast-casual restaurants. Their menu features a variety of offerings, including hamburgers, chicken, crinkle-cut fries, and milkshakes, catering to a diverse customer base.
In summary, while Yum! Brands excels in several financial aspects, including profitability and stability, Shake Shack presents a compelling case for growth investment due to its higher potential upside. Investors should weigh these factors carefully when considering their options in the fast-food sector.
