Those who invested in Shake Shack (NYSE:SHAK) three years ago are up 79%

Shake Shack Inc. (NYSE:SHAK) shareholders might be concerned after seeing the share price drop 10% in the last month. But over three years, the returns would have left most investors smiling In the last three years the share price is up, 79%: better than the market.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Shake Shack

We don't think that Shake Shack's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over the last three years Shake Shack has grown its revenue at 18% annually. That's pretty nice growth. The share price gain of 21% per year shows that the market is paying attention to this growth. Of course, valuation is quite sensitive to the rate of growth. Of course, it's always worth considering funding risks when a company isn't profitable.

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. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

It's good to see that Shake Shack has rewarded shareholders with a total shareholder return of 62% in the last twelve months. That's better than the annualised return of 11% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Shake Shack you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.