Shake Shack (NYSE: SHAK) and Restaurant Brands International (NYSE:QSR) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, risk, dividends, valuation, analyst recommendations, earnings and institutional ownership.

Dividends

Restaurant Brands International pays an annual dividend of $0.76 per share and has a dividend yield of 1.2%. Shake Shack does not pay a dividend. Restaurant Brands International pays out 52.8% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of recent ratings and price targets for Shake Shack and Restaurant Brands International, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Shake Shack 1 6 5 0 2.33
Restaurant Brands International 0 3 12 0 2.80

Shake Shack currently has a consensus target price of $37.17, indicating a potential upside of 18.71%. Restaurant Brands International has a consensus target price of $65.00, indicating a potential upside of 2.62%. Given Shake Shack’s higher probable upside, equities research analysts plainly believe Shake Shack is more favorable than Restaurant Brands International.

Volatility and Risk

Shake Shack has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, Restaurant Brands International has a beta of 1.77, suggesting that its stock price is 77% more volatile than the S&P 500.

Institutional & Insider Ownership

97.5% of Shake Shack shares are held by institutional investors. Comparatively, 76.7% of Restaurant Brands International shares are held by institutional investors. 34.9% of Shake Shack shares are held by insiders. Comparatively, 4.2% of Restaurant Brands International shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Shake Shack and Restaurant Brands International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Shake Shack 4.70% 8.71% 3.29%
Restaurant Brands International 12.66% 22.71% 3.99%

Valuation and Earnings

This table compares Shake Shack and Restaurant Brands International’s 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 2.58 $49.67 million $0.58 53.98
Restaurant Brands International $4.32 billion 3.46 $1.91 billion $1.44 43.99

Restaurant Brands International has higher revenue and earnings than Shake Shack. Restaurant Brands International is trading at a lower price-to-earnings ratio than Shake Shack, indicating that it is currently the more affordable of the two stocks.

Summary

Restaurant Brands International beats Shake Shack on 11 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.

Restaurant Brands International Company Profile

Restaurant Brands International Inc. is a quick service restaurant (QSR) company. The Company had over 20,000 restaurants in more than 100 countries and the United States territories, as of December 31, 2016. It operates through two segments: Tim Hortons (TH) and Burger King (BK). Tim Hortons restaurants are quick service restaurants with a menu that includes blend coffee, tea, espresso-based hot and cold specialty drinks, baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps and soups, among others. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks and other food items. The Company operates coffee roasting facilities in Hamilton, Ontario and Rochester, New York. The Company sells its raw materials and supplies, including coffee, sugar, paper goods and other restaurant supplies to Tim Hortons restaurants.

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