Critical Analysis: Shake Shack (NYSE:SHAK) versus BJ’s Restaurants (NASDAQ:BJRI)

BJ’s Restaurants (NASDAQ:BJRI) and Shake Shack (NYSE:SHAK) are both retail/wholesale companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, profitability, dividends, earnings and analyst recommendations.

Risk & Volatility

BJ’s Restaurants has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500. Comparatively, Shake Shack has a beta of 1.67, indicating that its share price is 67% more volatile than the S&P 500.

Insider and Institutional Ownership

100.0% of BJ’s Restaurants shares are owned by institutional investors. Comparatively, 86.1% of Shake Shack shares are owned by institutional investors. 4.9% of BJ’s Restaurants shares are owned by insiders. Comparatively, 8.5% of Shake Shack shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for BJ’s Restaurants and Shake Shack, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BJ’s Restaurants	2	6	3	0	2.09
Shake Shack	1	15	7	1	2.33

BJ’s Restaurants currently has a consensus price target of $38.75, suggesting a potential downside of 5.99%. Shake Shack has a consensus price target of $119.10, suggesting a potential upside of 42.26%. Given Shake Shack’s stronger consensus rating and higher probable upside, analysts clearly believe Shake Shack is more favorable than BJ’s Restaurants.

Valuation & Earnings

This table compares BJ’s Restaurants and Shake Shack”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BJ’s Restaurants	$1.36 billion	0.64	$16.69 million	$1.34	30.76
Shake Shack	$1.25 billion	2.85	$10.21 million	$1.02	82.07

BJ’s Restaurants has higher revenue and earnings than Shake Shack. BJ’s 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.

Profitability

This table compares BJ’s Restaurants and Shake Shack’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BJ’s Restaurants	2.23%	12.92%	4.67%
Shake Shack	3.10%	10.43%	3.04%

Summary

Shake Shack beats BJ’s Restaurants on 9 of the 15 factors compared between the two stocks.

About BJ’s Restaurants

BJ’s Restaurants, Inc. owns and operates casual dining restaurants in the United States. Its restaurants offer pizzas, craft and other beers, appetizers, entrées, pastas, sandwiches, specialty salads, and desserts under brand name Pizookie. The company was formerly known as Chicago Pizza & Brewery, Inc. and changed its name to BJ’s Restaurants, Inc. in August 2004. BJ’s Restaurants, Inc. was founded in 1978 and is based in Huntington Beach, California.

About Shake Shack

Shake Shack Inc. owns, operates, and licenses Shake Shack restaurants (Shacks) in the United States and internationally. Its Shacks offers hamburgers, chicken, hot dogs, crinkle cut fries, shakes, frozen custard, beer, wine, and other products. The company was founded in 2001 and is headquartered in New York, New York.