Shake Shack (SHAK) versus Darden Restaurants (DRI) Critical Analysis
Shake Shack (NYSE: SHAK) and Darden Restaurants (NYSE:DRI) are both retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, profitability, valuation, risk, institutional ownership and earnings.
Insider & Institutional Ownership
82.3% of Shake Shack shares are held by institutional investors. Comparatively, 88.7% of Darden Restaurants shares are held by institutional investors. 34.9% of Shake Shack shares are held by insiders. Comparatively, 0.6% of Darden Restaurants shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Risk & Volatility
Shake Shack has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, Darden Restaurants has a beta of 0.27, suggesting that its stock price is 73% less volatile than the S&P 500.
Valuation and Earnings
This table compares Shake Shack and Darden Restaurants’ top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Shake Shack||$315.90 million||2.73||$49.67 million||$0.58||57.29|
|Darden Restaurants||$7.39 billion||1.33||$969.50 million||$3.87||20.36|
Darden Restaurants has higher revenue and earnings than Shake Shack. Darden 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 is a summary of recent recommendations and price targets for Shake Shack and Darden Restaurants, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Shake Shack presently has a consensus price target of $36.73, indicating a potential upside of 10.52%. Darden Restaurants has a consensus price target of $84.43, indicating a potential upside of 7.17%. Given Shake Shack’s stronger consensus rating and higher probable upside, analysts clearly believe Shake Shack is more favorable than Darden Restaurants.
This table compares Shake Shack and Darden Restaurants’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Darden Restaurants pays an annual dividend of $2.52 per share and has a dividend yield of 3.2%. Shake Shack does not pay a dividend. Darden Restaurants pays out 65.1% of its earnings in the form of a dividend.
Darden Restaurants beats Shake Shack on 9 of the 16 factors compared between the two stocks.
Shake Shack Company Profile
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.
Darden Restaurants Company Profile
Darden Restaurants, Inc. is a full-service restaurant company. The Company owned and operated 1,536 restaurants through its subsidiaries in the United States and Canada, as of May 29, 2016. The Company’s segments include Olive Garden, LongHorn Steakhouse, Fine Dining (which includes The Capital Grille, and Eddie V’s Prime Seafood and Wildfish Seafood Grille (Eddie V’s)) and Other Business (which includes Yard House, Seasons 52, Bahama Breeze, consumer-packaged goods and franchise revenues). As of May 29, 2016, the Company also had 50 restaurants operated by independent third parties pursuant to area development and franchise agreements. Olive Garden’s menu includes a range of authentic Italian foods featuring fresh ingredients and a selection of imported Italian wines. LongHorn Steakhouse restaurants feature a range of menu items, including fresh steaks and chicken, as well as salmon, shrimp, ribs, pork chops, burgers and prime rib.
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