The S&P 500 was dropping on Thursday morning but shareholders of restaurant chain Shake Shack(NYSE: SHAK) might not have noticed. The company reported financial results for the second quarter of 2024 this morning before the stock market opened. And as of 11:30 a.m. ET, Shake Shack stock was up nearly 18%.
Growth and profits for the burger chain
In Q2, Shake Shack opened 12 new restaurants that are owned by the company and 11 licensed locations. Between these new locations and same-store-sales growth of 4%, the company's Q2 revenue was up 16% year over year to $316 million. That was higher than management's guidance and higher than expectations from analysts.
Shake Shack's profit metrics are also improving lately. In Q2, the company had operating income of nearly $11 million, which was a big jump from operating income of less than $5 million in the same quarter of last year.
Moreover, Shake Shack's management says it's on track this year to have positive free cash flow for the first time since 2017, which is another reason investors are celebrating.
What to do now
Shake Shack modestly raised parts of its full-year guidance. Management expects to generate about $1.24 billion in full-year revenue this year, which represents a good growth rate of at least 14%. And as mentioned, it does expect to generate positive full-year free cash flow.
Things are looking good for Shake Shack right now but one thing to think about is profitability. The company only had a thin Q2 operating margin of 3% even though things are as good as ever. It wouldn't take much of a headwind for the business to slip back to breakeven.
Considering the stock is up almost 40% this year, I don't see a compelling reason to rush out to buy Shake Shack stock today. It's better to watch this one from the sidelines for now, in my opinion.
Should you invest $1,000 in Shake Shack right now?
Before you buy stock in Shake Shack, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Shake Shack wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $717,050!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 29, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
