Flawed Bearish Narrative Has Driven Shake Shack's Price To Opportune Buying Level

|
About: Shake Shack Inc. (SHAK), Includes: CMG, DPZ, MCD, WEN, WING, YUM
by: Joseph Kowaleski
This article is exclusive for subscribers.
Joseph Kowaleski
Growth at reasonable price
Summary

Shake Shack has single-store economics that are far superior to Chipotle's early days.

The company is conservatively managed and shareholder-friendly; it sustainably invests in growth using its own cash flows, not diluting shareholders as the false bearish narrative suggests.

GAAP earnings do not represent the true underlying value of Shake Shack; the business is cheap considering cash flow.

Upscale fast-casual restaurants with higher-quality food are gaining share from tired legacy brands like McDonald's and Yum.

The sell-off has presented an opportune moment for long-term investors.

Thesis

Shake Shack's (SHAK) 40% decline from 52-week highs represents a compelling buying opportunity. It had simply run too far, but now is materially undervalued as the false bearish narrative has gained traction.