Zoe’s Kitchen (NYSE: ZOES) and Shake Shack (NYSE:SHAK) are both small-cap retail/wholesale companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, profitabiliy, dividends, analyst recommendations, earnings, institutional ownership and risk.

Earnings and Valuation

This table compares Zoe’s Kitchen and Shake Shack’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Zoe’s Kitchen $286.11 million 0.79 $22.79 million $0.01 1,159.00
Shake Shack $291.06 million 3.08 $44.91 million $0.53 65.77

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

Insider and Institutional Ownership

97.5% of Shake Shack shares are owned by institutional investors. 3.0% of Zoe’s Kitchen shares are owned by insiders. Comparatively, 34.9% of Shake Shack shares are owned by 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.

Volatility and Risk

Zoe’s Kitchen has a beta of 0.39, indicating that its share price is 61% less volatile than the S&P 500. Comparatively, Shake Shack has a beta of 1.32, indicating that its share price is 32% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Zoe’s Kitchen 0.15% 0.62% 0.37%
Shake Shack 4.55% 7.15% 2.70%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Zoe’s Kitchen and Shake Shack, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Zoe’s Kitchen 0 7 2 0 2.22
Shake Shack 1 6 5 0 2.33

Zoe’s Kitchen currently has a consensus target price of $19.56, suggesting a potential upside of 68.73%. Shake Shack has a consensus target price of $37.50, suggesting a potential upside of 7.57%. Given Zoe’s Kitchen’s higher probable upside, analysts plainly believe Zoe’s Kitchen is more favorable than Shake Shack.

Summary

Shake Shack beats Zoe’s Kitchen on 12 of the 14 factors compared between the two stocks.

About Zoe’s Kitchen

Zoe’s Kitchen, Inc. develops and operates fast-casual restaurants serving a menu of fresh, wholesome, Mediterranean-inspired dishes delivered with Southern hospitality. The Company’s menu offers meals made from scratch using produce, proteins and other ingredients, including its appetizers, soups, salads and kabobs. Its food, including both hot and cold items, is suited for catering to a range of business and social occasions. It caters to a range of dietary needs by offering vegetarian, vegan, gluten-free and its calorie conscious, Simply 500 menu selections. Its party packs serve groups of approximately 10 and are each filled with their own combination of fresh fruits, veggies, proteins and grains. The Company serves dishes for various occasions, such as Guilt-Free Girls Night, Game Day Goodies, Shower Sensations and Kids’ Party Pack. As of December 26, 2016, it had operated 201 Company-owned restaurants and three franchise restaurants in 20 states across the United States.

About Shake Shack

Shake Shack Inc. operates roadside burger stands. The Company serves an American menu of burgers, hot dogs, crispy chicken, frozen custard, crinkle cut fries, shakes, beer and wine, among others. The Company’s signature items are its all-natural, hormone and antibiotic-free burgers, hot dogs, crispy chicken, crinkle cut fries, shakes and frozen custard. Its menu focuses on food and beverages, crafted from a range of classic American foods. The Company’s domestic menu includes a range of signature items, such as the ShackBurger, SmokeShack, Shack-cago Dog, ‘Shroom Burger, seasonal frozen custard, hand-spun shakes, concretes, ShackMeister Ale, and Shack Red and Shack White wines. As of December 28, 2016, it had 114 Shacks in 13 countries and 16 states, as well as the District of Columbia. Its burgers are made with a whole-muscle blend of all-natural, hormone and antibiotic-free Angus beef, ground fresh daily, cooked to order and served on a non-genetically modified organism potato bun.

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