Shake Shack's (NYSE:SHAK) investors will be pleased with their decent 59% return over the last five years

If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. But Shake Shack Inc. (NYSE:SHAK) has fallen short of that second goal, with a share price rise of 59% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 49% over the last year.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Shake Shack

Given that Shake Shack only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Shake Shack saw its revenue grow at 17% per year. Even measured against other revenue-focussed companies, that's a good result. It's nice to see shareholders have made a profit, but the gain of 10% over the period isn't that impressive compared to the overall market. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot - modest share price gains but good top line growth over the long term justifies investigation, in our book.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Shake Shack is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Shake Shack in this interactive graph of future profit estimates.

A Different Perspective

It's good to see that Shake Shack has rewarded shareholders with a total shareholder return of 49% in the last twelve months. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Shake Shack better, we need to consider many other factors. For instance, we've identified 1 warning sign for Shake Shack that you should be aware of.

Of course Shake Shack may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.