Rotten Tomato Stocks
No Result
View All Result
  • News
    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    Wheat Futures Fall After Export Deal Reached

    Wheat Futures Fall After Export Deal Reached

    Toyota Industries Shares Slump After It Suspends Shipments of Certain Forklifts

    Toyota Industries Shares Slump After It Suspends Shipments of Certain Forklifts

    Lumen’s stock follows record annual decline with another steep plunge this year

    Lumen’s stock follows record annual decline with another steep plunge this year

  • NYSE
    Is ServiceNow (NYSE:NOW) Using Too Much Debt?

    Is ServiceNow (NYSE:NOW) Using Too Much Debt?

    McDonald’s Corp. stock falls Tuesday, underperforms market

    McDonald’s Corp. stock falls Tuesday, underperforms market

    Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade

    Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade

    Credit Suisse shares slump by two-thirds after UBS deal

    Credit Suisse shares slump by two-thirds after UBS deal

  • NASDAQ
    Check-Cap Falls 43% After C-Scan Study Update

    Check-Cap Falls 43% After C-Scan Study Update

    Equinix Inc. stock falls Tuesday, underperforms market

    Equinix Inc. stock falls Tuesday, underperforms market

    Halozyme Therapeutics (NASDAQ:HALO) Hits New 12-Month Low on Analyst Downgrade

    Halozyme Therapeutics (NASDAQ:HALO) Hits New 12-Month Low on Analyst Downgrade

    Aziyo Biologics Shares Fall to New Low After FDA Rejection

    Aziyo Biologics Shares Fall to New Low After FDA Rejection

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

  • News
    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    Wheat Futures Fall After Export Deal Reached

    Wheat Futures Fall After Export Deal Reached

    Toyota Industries Shares Slump After It Suspends Shipments of Certain Forklifts

    Toyota Industries Shares Slump After It Suspends Shipments of Certain Forklifts

    Lumen’s stock follows record annual decline with another steep plunge this year

    Lumen’s stock follows record annual decline with another steep plunge this year

  • NYSE
    Is ServiceNow (NYSE:NOW) Using Too Much Debt?

    Is ServiceNow (NYSE:NOW) Using Too Much Debt?

    McDonald’s Corp. stock falls Tuesday, underperforms market

    McDonald’s Corp. stock falls Tuesday, underperforms market

    Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade

    Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade

    Credit Suisse shares slump by two-thirds after UBS deal

    Credit Suisse shares slump by two-thirds after UBS deal

  • NASDAQ
    Check-Cap Falls 43% After C-Scan Study Update

    Check-Cap Falls 43% After C-Scan Study Update

    Equinix Inc. stock falls Tuesday, underperforms market

    Equinix Inc. stock falls Tuesday, underperforms market

    Halozyme Therapeutics (NASDAQ:HALO) Hits New 12-Month Low on Analyst Downgrade

    Halozyme Therapeutics (NASDAQ:HALO) Hits New 12-Month Low on Analyst Downgrade

    Aziyo Biologics Shares Fall to New Low After FDA Rejection

    Aziyo Biologics Shares Fall to New Low After FDA Rejection

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

No Result
View All Result
Rotten Tomato Stocks
No Result
View All Result

Is Shake Shack (NYSE:SHAK) Using Debt Sensibly?

Editorial Staff by Editorial Staff
October 26, 2021
0
Is Shake Shack (NYSE:SHAK) Using Debt Sensibly?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, ‘The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.’ So it seems the smart money knows that debt – which is usually involved in bankruptcies – is a very important factor, when you assess how risky a company is. We note that Shake Shack Inc. (NYSE:SHAK) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company’s use of debt, we first look at cash and debt together.

What Is Shake Shack’s Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2021 Shake Shack had US$243.0m of debt, an increase on none, over one year. But it also has US$420.2m in cash to offset that, meaning it has US$177.2m net cash.

debt-equity-history-analysis
NYSE:SHAK Debt to Equity History October 24th 2021

How Healthy Is Shake Shack’s Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Shake Shack had liabilities of US$124.5m due within 12 months and liabilities of US$864.2m due beyond that. Offsetting this, it had US$420.2m in cash and US$11.7m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$556.8m.

Since publicly traded Shake Shack shares are worth a total of US$2.97b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Shake Shack boasts net cash, so it’s fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Shake Shack can strengthen its balance sheet over time.

Over 12 months, Shake Shack reported revenue of US$631m, which is a gain of 16%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Shake Shack?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Shake Shack had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$20m and booked a US$22m accounting loss. With only US$177.2m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we’d say the stock is a bit risky, and we’re usually very cautious until we see positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. 

Related Posts

Is ServiceNow (NYSE:NOW) Using Too Much Debt?
NYSE

Is ServiceNow (NYSE:NOW) Using Too Much Debt?

March 22, 2023
McDonald’s Corp. stock falls Tuesday, underperforms market
NYSE

McDonald’s Corp. stock falls Tuesday, underperforms market

March 22, 2023
Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade
NYSE

Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade

March 22, 2023
Credit Suisse shares slump by two-thirds after UBS deal
NYSE

Credit Suisse shares slump by two-thirds after UBS deal

March 21, 2023
Load More
Next Post
Listeria contamination prompts recall of Barossa Fine Foods ham products sold across Australia

Listeria contamination prompts recall of Barossa Fine Foods ham products sold across Australia

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

POPULAR NEWS

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

April 14, 2021
CN Rail Stock Is So Undervalued That it’s Absurd

CN Rail Stock Is So Undervalued That it’s Absurd

May 2, 2021
US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

June 17, 2021
Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

September 14, 2021
10 Warning Signs That Should Tell You “This Stock is in Trouble”

10 Warning Signs That Should Tell You “This Stock is in Trouble”

November 11, 2019

EDITOR'S PICK

Lyft stock sinks 14% despite price increases driving record revenue

Lyft stock sinks 14% despite price increases driving record revenue

November 8, 2022
Introducing Valaris (NYSE:VAL), The Stock That Collapsed 96%

Introducing Valaris (NYSE:VAL), The Stock That Collapsed 96%

February 26, 2020
Sleep Number Shares Drop 21% On Slashed FY Earnings Outlook

Sleep Number Shares Drop 21% On Slashed FY Earnings Outlook

October 28, 2022
Salesforce Inc., Microsoft share losses lead Dow’s 50-point drop

Salesforce Inc., Microsoft share losses lead Dow’s 50-point drop

July 13, 2022

Stay Updated

Get breaking news delivered straight into your inbox

Nothing in this publication should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. Rotten Tomato stocks is a wholly-owned subsidiary of Grainne Capital Limited.
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

Rotten Tomato Stocks cover the companies and markets that are declining, failing or headed for disaster. We help investors spot the down tends and recognize when something smells rotten.

RECENT POSTS

First Majestic Shares Drop After Mining at Nevada Operation Suspended

Is ServiceNow (NYSE:NOW) Using Too Much Debt?

McDonald’s Corp. stock falls Tuesday, underperforms market

POPULAR POSTS

Burford Capital (NYSE:BUR) Trading Down 5.3% Following Analyst Downgrade

Check-Cap Falls 43% After C-Scan Study Update

Equinix Inc. stock falls Tuesday, underperforms market

© Copyright 2023 RottenTomatoStocks. All Rights Reserved 

Disclaimer | Privacy Policy

No Result
View All Result
  • HOME
  • NEWS
  • NYSE
  • NASDAQ
  • OTC
  • TSX

© 2021 RottenTomatoStocks.com

error: Content is protected !!
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.