Shake Shack – Market Valuation
Shake Shack’s Updated Book, Intrinsic, Buy, and Sell Values – August 2025
Shake Shack’s current market price is greater than $100. During the last year, Shake Shack’s stock price peaked at $141 per share. P.T. Barnum is credited with the famous quote: “There is no better friend than a frank, an honest, and a truthful friend“. The reality is that Shake Shack, at best, is worth $16 a share. To state it in investor language, what would you pay for a stock security that has earned a total of 56 cents in twelve and a half years of existence? In effect, this company is earning an average of five cents per year. Even at a 20:1 price-to-earnings ratio, which is only applicable to the best player in the fast-food industry, McDonald’s, the maximum an investor would pay for Shake Shack is $1 per share.
Shake Shake has several positive financial attributes, such as a good book value and reasonable cash flow, which push the market value higher. But in reality, nobody in their right mind as an investor would ever pay more than $16 per share for Shake Shack. This article will explain this company’s book value, delve deeper into the intrinsic value, cover the optimum buy price for value investors, and lastly, cover the sell price to get a good return on one’s investment.
Shake Shack – Book Value
There is a strong book value per share at $12.16 each as of June 30, 2025. This reflects the following schedule of common stock attributes:
Par Value Plus Capital Paid in Excess of Par Value $485.7 million
Retained Earnings Lifetime to Date (Net of Non-Controlling Interests) 23.4 million
Equity Attributable to Shack Shake Shareholders $519.1 million
42,683,770 Shares Outstanding (Classes ‘A’ and ‘B’) $12.16 per Share
A very interesting attribute about this book value is that the company currently has $187 million in working capital. This is equal to $4.38 per share, which is a good indicator of value, especially when considering intrinsic value (see the next section). The reason the book value is so strong is due to the expanding volume of shares issued and sold in the market to raise capital over the last ten years. The following illustrates this expanding capital value, and as such, an investor must acknowledge that fact that the core reason book value is so high is due to the redemption of Class ‘B’ stock at higher market prices, which reduces risk for the original and previous shareholders.
Year Ending #of Class A/B Shares Total Par & Capital Paid in Excess
2015 36,250,000 $96.3 million
2019 37,562,499 $282.4 million
2022 42,154,511 $458.6 million
2024 42,523,781 $483.0 million
To further complicate book value, Shake Shack has two classes of stock with A and B Classes. The ‘B’ Class is non-controlling interest holders, and this group has shrunk over the last 10 years, whereby they now own 5.7% of Shake Shack. Class ‘B’ owners are allowed to redeem their shares for ‘A’ shares. As this occurs, the capital paid in excess increases due to the exchange of non-controlling value to Class ‘A’ shares. This does impact book value, but to a much lesser degree than five and six years ago. It is expected that the remaining 5.7% held by the Class ‘B’ holders will redeem over the next few years as the Tax Receivable Agreement matures. Thus, the impact on book value will be less as time passes. Book value will then be the result of operations via retained earnings and any future sale of Class ‘A’ shares at a price greater than the current book value.
Those initial shareholders from 2015 have reaped value from the redemption and equity/stock compensation sale of additional shares over the last 10 years. This conversion of shares happened at prices that were much greater than the original IPO sales price of $21 per share. This dramatically improved book value.
In summary, Shake Shack’s book value per share is $12. One of the fundamental rules of determining value for any young corporation is that real value tends to mirror or align with book value. Until the company has matured out of the complicated initial offering legal quagmire, book value is more in line with intrinsic value. With Shake Shack, there are several legal barriers it had and still has to fully morph into a traditional corporate structure. This includes:
- Redemption of LLC Interests
- Tax Receivable Agreement
- Equity-Based Compensation Program
- Stock Compensation Program
There remains about five years of maturation to truly diminish the impact of these respective issues in order for Shake Shake to fully resemble a traditional corporate financial structure with the equity section of the balance sheet. Recall, book value is a function of the equity section of the balance sheet. Book value becomes less and less important once a company begins to generate real income. Shake Shack has not generated real income over the last twelve years.
One more note is appropriate here: Shake Shack can not issue dividends due to the Tax Receivable Agreement. Until those Class ‘B’ shares are fully redeemed and that agreement is satisfied, book value will not be affected by dividends. This eliminates the ability of investors to use a yield formula to determine intrinsic value.
Shake Shack – Intrinsic Value
There are three dozen different tools/methods/techniques to generate intrinsic value. No single process is going to generate a hard and accurate dollar value. Sophisticated investors use multiple tools/methods/techniques to derive a range of intrinsic value. This range is then narrowed by exercising subjective thoughts using appropriate criteria to get within plus or minus three percent of the reasonable valuation of a security. This site’s Value Investment Fund follows this conservative approach when calculating intrinsic value.
One of the more popular methods is to use the discounted earnings formula to generate intrinsic value. The concept is simple: using a discount rate, all future annual earnings are discounted back to today and totaled for a combined value. The discount rate is a risk factor; future earnings are estimated based on recent historical earnings and averaged going forward with a growth rate of those earnings. This particular method is inappropriate for young, unstable, and high-risk operations like Shake Shack. The proof is in the earnings per share since inception. Look at the respective earnings per share over the last 12.5 years:
Year Earnings
2013 $0.18
2014 0.07
2015 (0.65) *Loss
2016 0.53
2017 (0.01) *Loss
2018 0.52
2019 0.61
2020 (1.14) *Loss
2021 (0.22) *Loss
2022 (0.54) *Loss
2023 0.46
2024 0.23
2025 (Six Months) 0.51
In total, Shake Shack has earned 55 cents/share in twelve and a half years. The wild swings of profitability indicate instability, and this is common with young, immature organizations. All of the elements to properly exercise the discounted earnings method are nonexistent. A footnote is necessary here, with fast food restaurants, growth is a function of four common metrics:
- Volume of Customers
- Inflationary Price Adjustments
- Addition of Restaurants
- Price Mix of Products (changes in consumer patterns such as meal deals, add-ons, upsizing, etc.)
As an example, recent real growth with Shake Shack’s revenue only exists with the addition of new locations. Growth in revenue at Shack Shake is not a function of increased sales at each restaurant, but a function of additional locations. True growth is driven by increased volume of customers and not by inflationary adjustments. For Shake Shack, during the first six months of 2025, guest traffic is down 2%. See this statement from Shake Shack’s quarterly report ending 06/25/25.
Shake Shack is not experiencing real growth. This impacts several of the different methods of determining intrinsic value. Thus, methods such as discounted earnings and cash flows must be adjusted to reflect this decline with true growth. Alternatively, a value investor will exercise other tools to calculate intrinsic value. These tools include liquidation, independent sale of stores, and optimum operations. The following sections break these alternative tools out in detail to assist the reader with understanding other approaches to calculating intrinsic value.
Liquidation
When an individual passes, their respective estate goes through a process called probate. This involves the proper distribution of the deceased’s assets net of their liabilities out to heirs. In business, this is referred to as liquidation. Often, this occurs when a company experiences formal bankruptcy. Assets are sold off and liabilities are paid with the proceeds, and the business is now extinct. Liquidation can happen in a gradual, extended time frame similar to how Sears was handled over the last 25 years. This is how creditors receive maximum value for their respective amounts owed. Or, it can happen in a very limited time frame via a fire sale, similar to an auction. The difference between the two extreme processes is generally 75 cents on the dollar. Fire sales generate about 18% of the assets’ values, and a more formal, properly exercised liquidation will generate about 93 cents on the dollar.
Assuming a properly managed liquidation of Shake Shack with an extended time frame to maximize value, Shake Shack will generate about one-third of the book value. This is due to the nature of leases and deferred income tax assets. This particular article will not explain this due to the protracted discussion points, multiple layers of formulas, and complexity with taxation. Suffice it to say, 35% of book value is reasonable as the result. Current book value is $475 million, liquidation will bring $166 million to stakeholders, and it will take about five years to properly carry this out. Thus, each share will receive slightly less than $4.
Sale of Assets
Unlike liquidation, the sale of assets isn’t done within a restricted time frame. It is carried out to generate the proper value for all assets. Since the bulk of Shake Shack’s assets are the company-owned stores, the process would involve converting those stores into franchised units. In effect, each store would be sold as a Shake Shack, and they, in turn, would generate a 4% sales royalty source. Due to the associated leases and the fact that each store is already an ongoing operation, each store is worth about $1.2 million net of its respective leases, debt, Tax Receivable Agreement, and other liabilities. The result is the collapsing of the balance sheet to two major asset groups. The first being cash, and the second would be a smaller value associated with the discounted future royalties unearned and unpaid. Basically, this would be an estimated value of royalties discounted at a high discount rate reflecting the risk factor involved.
Shack Shake has 346 company-owned stores and 264 licensed stores. The conversion of the 346 stores to franchised operations would generate $415 million. Add to this the existing $360 million of cash, and the first major asset group is valued at around $775 million. The second major asset group of future royalties discounted to today’s dollars would approximate $150 million; see Intrinsic Value of McDonald’s for a more detailed analysis of how discounted royalties are calculated.
In total, the sale of existing assets and the sale of a royalty contract would bring about $925 million in total to current shareholders. This equates to $21.75 per share in value.
Optimum Operations
This method assumes that Shack Shack will operate at efficient standards as compared to McDonald’s. McDonald’s has over 3,000 company-owned locations and generates an 11.5% net profit after taxes on average for those stores. If Shack Shake achieved that standard, its current sales volume of $1.3 billion would generate $150 million per year in profit from existing locations. Subtract from this the general and administrative costs of approximately $140 million per year, and Shack Shake will earn about $10 million per year from existing stores. Add to this royalties of about $25 million per year from the overseas franchisees, and this organization earns approximately $35 million per year with a growth rate of 3% per year. Using a discount rate of 18% and under optimum operations, Wendy’s earnings are worth around $180 million, plus the existing working capital of $185 million, which makes Wendy’s valued at around $365 million. This equates to $8.50 per share.
The key here is that this is under optimum operations, i.e., Shake Shack will mirror the best fast food company in the world. Therefore, a more conservative value to account for the inability to conduct optimum operations similar to McDonald’s is $6 per share.
Intrinsic Value Summary
Discount earnings and cash flow formulas require a long history of positive earnings and stability to be useful and trustworthy with results. Dividend yields can’t be used because of the restrictions existing with the Tax Receivable Agreement. Therefore, the alternative methods are more appropriate for this young, highly unstable company. The results are extreme. Review the following schedule:
- Discounted Earnings – Incalculable due to inconsistency and no real growth element;
- Discounted Cash Flow – Cash flows are greatly impacted by excess depreciation, amortization, and intangible assets (operating leases and deferred income taxes);
- Fire Sale (Liquidation) – < $2/Share;
- Orderly Liquidation – $4/Share;
- Formal Asset Sale (Sale of Existing Restaurants) – $21/Share;
- Optimum Operations Assuming Proper G&A Cost Structure – $8/Share;
- Optimum Operations – $6/Share
Even under optimum operational conditions and assuming the company can get its general and administrative costs in line, the share price value is estimated at $6 to maybe as much as $8 per share. Given the high risk due to the various market, industry, and in-house risks, the intrinsic value for Shake Shack is estimated at $7 per share.
Intrinsic Value Per Share = $7
This August 2025 value is down from $9 per share as determined in the November 2021 Shake Shack calculation. This is a reflection of the loss incurred in 2022, along with the failure of Shake Shack to align its business model with the McDonald’s model. Until Shake Shack admits that it needs to realign the continental United States operations similarly to McDonald’s and Wendy’s, the ability to stabilize and reduce risks will remain, which in turn will generate wild swings in earnings and cash flows.
Shake Shack – Buy Price
As advocated by Benjamin Graham and David Dodd, the fathers of value investing, a value investor determines the true worth value (intrinsic value) and then sets a discount rate against that true worth to buy the security. The more reliable, stable, consistent, and managed a company is, the lower the discount rate involved. In general, this chart paints an appropriate generalized discount rate against groupings of securities:
. Status of Investment Appropriate Discount Rate for Security Acquisition
Dow Jones Industrials 7 to 11%
S&P 500 9 to 13%
S&P Composite 1500/NASDAQ 12 to 22%
Mid-Caps/Growth 20 to 30%
Small-Caps 30 to 40%
Penny Stocks 40 to 70%
Currently, Shake Shake is selling at more than $100 per share, placing the market value in line with a Small-Cap to Mid-Cap range. In reality, with a book and intrinsic value of less than $13 per share, the company is more in line with a low-end Small Cap investment. Thus, the discount rate is at least 30%. However, there are subjective elements that have to be considered when determining an appropriate discount rate.
When determining an appropriate discount rate against the intrinsic value, subjective factors must be considered. If an investor reads the notes along with management comments in the annual report, you will notice a very strong indication of risk. It spends 35 pages out of 166 identifying seven groups of risks with a total of fifty-five (55) individualized risks. This includes identifying and finding available suitable locations for new restaurants, to a lack of control over licensees. Each identified risk can greatly impact the ability to generate the minimum required profit of 11.5% from restaurant operations.
Given the above, a fair and reasonable discount factor to the current intrinsic value to buy a share of Share Shack is 40%. Therefore, a fair and best buy price for Shake Shake over the next year through 2026 is $4.25 per share.
Shake Shake Buy Price – $4.25 Per Share
Shake Shack – Sell Price
Without consistent earnings and a good plan, Shake Shack’s market price will fluctuate wildly due to speculation. It is so unlikely the market price will drop below $10 anytime soon, or for that matter, within the next five years, unless the institutional investors decide to get out; i.e. jumping ship is the best option. Thus, for this section, the selling price would be set at anything greater than $15 per share, assuming recovery can occur within 24 months of the time of purchase. This would generate a greater than 85% annualized return on the $4.25 per share investment.
Shake Shake Sell Price – $15.00 Per Share
Summary – Shake Shack’s Book, Intrinsic, Buy and Sell Values
The likelihood that the buy price will drop well below book value is remote at best and simply unheard of because some private equity firm will buy up the company for the sole purpose of converting the business model to a more appropriate and industry-matching format.
Because this site prioritizes risk reduction and proper valuation based on utilizing appropriate methods/tools/techniques to value securities, Shake Shack will never become a member of this site’s Value Investment Fund. Simply stated, the risk factors are too great to justify this company as a legitimate potential investment. Furthermore, Shake Shack is more in line with speculation as an investment versus a solid, low-risk risk highly secure investment opportunity.
Lastly, Shake Shack is 45% held by seven institutional investors. It is highly unlikely these investors will suddenly sell off their respective holdings without creating a run on the market value of the stock price. They are all simply waiting for a private equity firm to buy out Shake Shack once the company retires that Tax Receivable Agreement and adds more stores. Over the next few years, the company’s operations should continue to stabilize and improve, making this company an ideal target for a takeover of some sort.
The book ($12), intrinsic ($7), buy ($4.25), and sell price ($15) are well out of range of a buyout offer. As such, there is practically zero chance of any of this occurring. Thus, this article serves as another illustration of how this site’s facilitator uses many different methods/tools/techniques to determine the various price points for securities. This particular stock has too much risk and isn’t large enough with market capitalization to warrant investment or use as a member of the Value Investment Fund’s Fast-Food Restaurant Pool. Act on Knowledge.