Shares of quickly growing fast-casual dining chain Shake Shack (NYSE: SHAK) took a 29% haircut this morning after the stock reported first-quarter earnings. While Shake Shack delivered Q1 sales growth of 14%, this fell well short of Wall Street’s expectations, as did its $0.00 in earnings per share, which was $0.12 below consensus. With these underwhelming figures, and the company’s adjusted EBITDA margin declining from 12.7% last year to 10.1% in Q1 this year, the market sold off the stock. Looking ahead, management guided for sales to grow by 14% in 2026, adjusted EBITDA margins to rise back to 14.4%, and for the company to add 60 to 65 new locations — a near 10% increase from today’s total of 679.
My biggest concern in today’s earnings report was Shake Shack’s declining cash from operations (CFO). Over the last two years, the company’s CFO exceeded capital expenditures (primarily for new locations), meaning it was funding its expansion in-house. However, in Q1, CFO was only $8.5 million, while capex was $47.2 million. While I don’t want to overreact to these figures from 90 days’ worth of data — especially as the decline may stem from the company’s Project Catalyst, which aims to modernize its locations — it is something to monitor going forward. Shake Shack had finally reined in shareholder dilution thanks to its rising CFO and looked set to grow via its own cash generation, making the stock a promising investment proposition.
Image source: Getty Images.
Shake Shack whiffed on its first-quarter earnings, but it seems far too early to give up on the promising growth stock.
Shares of quickly growing fast-casual dining chain Shake Shack (SHAK 27.95%) took a 29% haircut this morning after the stock reported first-quarter earnings. While Shake Shack delivered Q1 sales growth of 14%, this fell well short of Wall Street’s expectations, as did its $0.00 in earnings per share, which was $0.12 below consensus. With these underwhelming figures, and the company’s adjusted EBITDA margin declining from 12.7% last year to 10.1% in Q1 this year, the market sold off the stock. Looking ahead, management guided for sales to grow by 14% in 2026, adjusted EBITDA margins to rise back to 14.4%, and for the company to add 60 to 65 new locations — a near 10% increase from today’s total of 679.
Shake Shack
Today’s Change
(-27.95%) $-26.98
Current Price
$69.54
My biggest concern in today’s earnings report was Shake Shack’s declining cash from operations (CFO). Over the last two years, the company’s CFO exceeded capital expenditures (primarily for new locations), meaning it was funding its expansion in-house. However, in Q1, CFO was only $8.5 million, while capex was $47.2 million. While I don’t want to overreact to these figures from 90 days’ worth of data — especially as the decline may stem from the company’s Project Catalyst, which aims to modernize its locations — it is something to monitor going forward. Shake Shack had finally reined in shareholder dilution thanks to its rising CFO and looked set to grow via its own cash generation, making the stock a promising investment proposition.
Image source: Getty Images.
That said, investors shouldn’t panic just yet, as management expects margins to rebound throughout 2026 and has a long-term goal to more than double its current store count. Furthermore, the 17 locations Shake Shack opened in Q1 were the most in its history, so some of this margin weakness likely stems from the outsize costs associated with that faster growth. Trading at just 14 times CFO — even after this quarter’s CFO decline — Shake Shack is a reasonably priced and intriguing growth stock, especially as it launches a loyalty program in 2026.
