Head-To-Head Comparison: Shake Shack (NYSE:SHAK) and McDonald’s (NYSE:MCD)

Shake Shack (NYSE:SHAK) and McDonald’s (NYSE:MCD) are both retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, risk, valuation, earnings, institutional ownership, analyst recommendations and profitability.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Shake Shack	2.76%	9.62%	2.81%
McDonald’s	31.62%	-395.08%	14.76%

Risk & Volatility

Shake Shack has a beta of 1.78, indicating that its share price is 78% more volatile than the S&P 500. Comparatively, McDonald’s has a beta of 0.43, indicating that its share price is 57% less volatile than the S&P 500.

Institutional & Insider Ownership

86.1% of Shake Shack shares are held by institutional investors. Comparatively, 70.3% of McDonald’s shares are held by institutional investors. 8.5% of Shake Shack shares are held by company insiders. Comparatively, 0.3% of McDonald’s shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Shake Shack and McDonald’s”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shake Shack	$1.45 billion	2.07	$45.72 million	$1.09	64.35
McDonald’s	$26.89 billion	7.29	$8.56 billion	$12.13	22.72

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

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Shake Shack and McDonald’s, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shake Shack	0	13	14	1	2.57
McDonald’s	1	14	17	0	2.50

Shake Shack currently has a consensus price target of $107.92, suggesting a potential upside of 53.86%. McDonald’s has a consensus price target of $335.14, suggesting a potential upside of 21.60%. Given Shake Shack’s stronger consensus rating and higher probable upside, equities analysts clearly believe Shake Shack is more favorable than McDonald’s.

Summary

Shake Shack beats McDonald’s on 8 of the 15 factors compared between the two stocks.

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.

About McDonald’s

McDonald’s Corp. engages in the operation and franchising of restaurants. It operates through the following segments: U.S., International Operated Markets, and International Developmental Licensed Markets and Corporate. The U.S. segment focuses its operations on the United States. The International Operated Markets segment consists of operations and the franchising of restaurants in Australia, Canada, France, Germany, Italy, the Netherlands, Spain, and the U.K. The International Developmental Licensed Markets and Corporate segment consists of developmental licensee and affiliate markets in the McDonald’s system. The firm’s products include Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, McDonald’s Fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafe beverages, and other beverages. The company was founded by Raymond Albert Kroc on April 15, 1955, and is headquartered in Oak Brook, IL.