Financial Review: Shake Shack (NYSE:SHAK) vs. Yum China (NYSE:YUMC)

Yum China (NYSE:YUMC) and Shake Shack (NYSE:SHAK) are both retail/wholesale companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, profitability, earnings, analyst recommendations and risk.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Yum China	8.04%	14.13%	8.19%
Shake Shack	3.10%	10.43%	3.04%

Volatility and Risk

Yum China has a beta of 0.18, indicating that its share price is 82% less volatile than the S&P 500. Comparatively, Shake Shack has a beta of 1.69, indicating that its share price is 69% more volatile than the S&P 500.

Insider and Institutional Ownership

85.6% of Yum China shares are held by institutional investors. Comparatively, 86.1% of Shake Shack shares are held by institutional investors. 0.4% of Yum China shares are held by insiders. Comparatively, 8.5% of Shake Shack shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations for Yum China and Shake Shack, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Yum China	0	1	0	1	3.00
Shake Shack	3	13	7	1	2.25

Shake Shack has a consensus price target of $120.52, indicating a potential upside of 33.06%. Given Shake Shack’s higher probable upside, analysts plainly believe Shake Shack is more favorable than Yum China.

Valuation and Earnings

This table compares Yum China and Shake Shack”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Yum China	$11.57 billion	1.44	$911.00 million	$2.41	19.18
Shake Shack	$1.25 billion	3.09	$10.21 million	$1.02	88.80

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

About Yum China

Yum China Holdings, Inc. owns, operates, and franchises restaurants in the People's Republic of China. The company operates through KFC, Pizza Hut, and All Other segments. It operates restaurants under the KFC, Pizza Hut, Taco Bell, Lavazza, Little Sheep, and Huang Ji Huang concepts. The company also operates V-Gold Mall, a mobile e-commerce platform to sell products; and offers online food deliver services. Yum China Holdings, Inc. was founded in 1987 and is headquartered in Shanghai, the People's Republic of China.

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.