Yum! Brands (NYSE:YUM) and Shake Shack (NYSE:SHAK) are both significant players in the restaurant sector, but they present different investment opportunities. A recent financial survey evaluated these two companies across various metrics, including risk, profitability, valuation, and institutional ownership, to determine which offers a superior investment proposition.
Volatility and Risk Assessment
In terms of volatility, Yum! Brands demonstrates a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500. This lower beta suggests greater stability and potentially lower risk for investors. On the other hand, Shake Shack’s beta stands at 1.67, signifying that its share price is 67% more volatile than the S&P 500, which may appeal to those seeking higher-risk, higher-reward opportunities.
Valuation and Earnings Comparison
When examining revenue and earnings, Yum! Brands outperforms Shake Shack. The former generates higher total revenue and earnings per share (EPS), making it a more attractive option based on current financial performance. Additionally, Yum! Brands trades at a lower price-to-earnings (P/E) ratio than Shake Shack, suggesting it is currently the more affordable stock for potential investors.
According to data from MarketBeat.com, Yum! Brands has a consensus target price of $167.38, indicating a potential upside of 8.91%. In contrast, Shake Shack’s consensus target price of $119.10 reflects a more substantial upside potential of 38.97%. This higher upside may lead analysts to favor Shake Shack as a more promising investment.
Profitability and Ownership Insights
Further analysis reveals that Yum! Brands and Shake Shack differ in profitability metrics such as net margins and returns on equity. Yum! Brands boasts stronger profit margins, enhancing its appeal to investors focused on financial health. Institutional ownership is another critical factor; 82.4% of Yum! Brands shares are held by institutional investors, compared to 86.1% for Shake Shack. This indicates a strong belief among large investors in both companies’ long-term growth prospects.
Insider ownership also varies significantly, with only 0.3% of Yum! Brands shares owned by insiders, while Shake Shack has 8.5% insider ownership. Higher insider ownership can suggest greater confidence from company executives in their own organization’s future.
Conclusion
Overall, Yum! Brands excels in most of the comparative factors analyzed, leading in eight out of the fifteen metrics evaluated. The company, which operates well-known brands such as KFC, Taco Bell, and Pizza Hut, has a long-standing presence in the quick-service restaurant market. Founded in 1997 and headquartered in Louisville, Kentucky, Yum! Brands continues to expand its global footprint.
Shake Shack, founded in 2001 and based in New York, New York, remains a vibrant contender in the fast-casual dining segment. Its commitment to quality and innovation keeps it in the spotlight, but investors must weigh its higher risk profile against potential returns.
This financial comparison emphasizes that while both companies have their strengths, Yum! Brands may offer a more stable investment option, whereas Shake Shack presents a higher-risk opportunity with potentially greater rewards. Investors should consider these factors carefully when determining their investment strategies.
