Critical Analysis: The Habit Restaurants (HABT) & Shake Shack (SHAK)
The Habit Restaurants (NASDAQ: HABT) and Shake Shack (NYSE:SHAK) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, earnings, analyst recommendations, valuation, profitability, dividends and institutional ownership.
Institutional and Insider Ownership
73.8% of The Habit Restaurants shares are held by institutional investors. Comparatively, 82.3% of Shake Shack shares are held by institutional investors. 16.1% of The Habit Restaurants shares are held by company insiders. Comparatively, 34.9% of Shake Shack shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
This is a summary of current ratings for The Habit Restaurants and Shake Shack, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|The Habit Restaurants||0||3||3||0||2.50|
The Habit Restaurants currently has a consensus price target of $17.50, suggesting a potential upside of 34.10%. Shake Shack has a consensus price target of $36.73, suggesting a potential upside of 10.52%. Given The Habit Restaurants’ stronger consensus rating and higher possible upside, equities research analysts clearly believe The Habit Restaurants is more favorable than Shake Shack.
Earnings & Valuation
This table compares The Habit Restaurants and Shake Shack’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|The Habit Restaurants||$307.71 million||0.86||$29.44 million||$0.25||52.20|
|Shake Shack||$315.90 million||2.73||$49.67 million||$0.58||57.29|
Shake Shack has higher revenue and earnings than The Habit Restaurants. The Habit Restaurants is trading at a lower price-to-earnings ratio than Shake Shack, indicating that it is currently the more affordable of the two stocks.
This table compares The Habit Restaurants and Shake Shack’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|The Habit Restaurants||1.64%||4.97%||2.16%|
Risk & Volatility
The Habit Restaurants has a beta of 1.08, suggesting that its stock price is 8% more volatile than the S&P 500. Comparatively, Shake Shack has a beta of 1.33, suggesting that its stock price is 33% more volatile than the S&P 500.
Shake Shack beats The Habit Restaurants on 12 of the 14 factors compared between the two stocks.
About The Habit Restaurants
The Habit Restaurants, Inc. (Habit Burger Grill) is a fast casual restaurant company. The Company is engaged in preparing made-to-order char-grilled burgers and sandwiches featuring tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. In addition, it offers sides, shakes and malts. The Company prepares its burgers with char-grilled preparation, topped with caramelized onions, melted cheese, lettuce and tomatoes. It operates a range of restaurant formats, including end-cap, free-standing, inline, end-cap drive-thru and traditional stand-alone drive-in, primarily within suburban shopping centers and retail settings. As of December 27, 2016, the Company had 172 locations in 15 markets in 10 states and the United Arab Emirates, including franchised/licensed locations (excluding six licensed locations in Santa Barbara County, California).
About Shake Shack
Shake Shack Inc. operates roadside burger stands. The Company serves an American menu of burgers, hot dogs, crispy chicken, frozen custard, crinkle cut fries, shakes, beer and wine, among others. The Company’s signature items are its all-natural, hormone and antibiotic-free burgers, hot dogs, crispy chicken, crinkle cut fries, shakes and frozen custard. Its menu focuses on food and beverages, crafted from a range of classic American foods. The Company’s domestic menu includes a range of signature items, such as the ShackBurger, SmokeShack, Shack-cago Dog, ‘Shroom Burger, seasonal frozen custard, hand-spun shakes, concretes, ShackMeister Ale, and Shack Red and Shack White wines. As of December 28, 2016, it had 114 Shacks in 13 countries and 16 states, as well as the District of Columbia. Its burgers are made with a whole-muscle blend of all-natural, hormone and antibiotic-free Angus beef, ground fresh daily, cooked to order and served on a non-genetically modified organism potato bun.
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