Think of Shake Shack as the cooler, smarter, tastier and more upscale burger joint. Basically, the polar opposite of McDonald’s, with all-natural, hormone and antibiotic free burgers, well designed stores, and friendly, committed workers, which is exactly what you’d expect from a Danny Meyer vehicle. The concept is captivating in and of itself, but even more compelling are the numbers, which are better than any other public restaurant chain. In 2013, its average unit volumes came in at $5 million – an astounding number that’s more than twice the $2.2 million that a best-in-breed Chipotle generates. Shake Shack’s domestic locations generate average cash-on-cash returns of 65%, meaning the payback period for opening a new restaurant is less than two years. But the real upside here is all about the opportunity for new store growth. Shake Shack has said they intend to triple their unit base over the next five years, meaning they could expand from 63 locations to nearly 190. In just 2015, Shake Shack plans to open 10 new stores, which translates into 40% unit growth, among the fastest in the industry. Research Analyst Jack Mohr says as for valuation, he’s very comfortable paying 5.5x forward sales, which implies a $25 share price, or a 36% premium to the midpoint of the offering range. He expects shares to fly as soon as it hits the market, so it might be worth waiting for a pullback to get in.
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