What is Shake Shack Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Shake Shack's Probability of Financial Distress (%) is 0.04%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of Shake Shack's Probability of Financial Distress (%)
For the Restaurants subindustry, Shake Shack's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Shake Shack's Probability of Financial Distress (%) Distribution in the Restaurants Industry
For the Restaurants industry and Consumer Cyclical sector, Shake Shack's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Shake Shack's Probability of Financial Distress (%) falls into.
Shake Shack Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | -7.87 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.04% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Shake Shack (Shake Shack) Business Description
Traded in Other Exchanges
Address
225 Varick Street, Suite 301, New York, NY, USA, 10014
Shake Shack Inc is a roadside burger stands. It is serving a classic American menu of premium burgers, hot dogs, crispy chicken, frozen custard, crinkle-cut fries, shakes, beer, wine and more. The company's burgers are made with a whole-muscle blend of all-natural, hormone and antibiotic-free Angus beef, ground fresh daily, cooked to order and served on a non-genetically modified organism (GMO) potato bun. Its menu focuses on food and beverages, crafted from a range of classic American foods. The company serves draft Root Beer, seasonal freshly-squeezed lemonade, organic fresh brewed iced tea, cold brew coffee, organic apple juice, and Shack20 bottled water.
Executives
| Jeffrey Flug |
director |
C/O PENNANTPARK INVESTMENT CORPORATION, 445 PARK AVENUE, 10TH FLOOR, NEW YORK NY 10022 |
| Chapman Charles J Iii |
director |
1502 HUNTER DRIVE, WAYZATA MN 55391 |
| Zach Koff |
officer: Chief Operating Officer |
C/O SHAKE SHACK INC., 24 UNION SQUARE EAST, 5TH FLOOR, NEW YORK NY 10003 |
| Jeffrey D Lawrence |
director |
30 FRANK LLOYD WRIGHT DR, ANN ARBOR MI 48105 |
| Lori George Billingsley |
director |
777 HIDDEN RIDGE, IRVING TX 75038 |
| Daniel Harris Meyer |
director |
24 UNION SQUARE EAST, SIXTH FLOOR, NEW YORK NY 10003 |
| Jenna Lyons |
director |
C/O J.CREW GROUP, INC., 770 BROADWAY, NEW YORK NY 10003 |
| Katherine Irene Fogertey |
officer: Chief Financial Officer |
225 VARICK STREET, SUITE 301, NEW YORK NY 10014 |
| Randall J Garutti |
director, officer: Chief Executive Officer |
C/O SHAKE SHACK INC., 24 UNION SQUARE EAST, 5TH FLOOR, NEW YORK NY 10003 |
| Tara Comonte |
officer: CHIEF FINANCIAL OFFICER |
C/O SHAKE SHACK INC., 24 UNION SQUARE EAST,5TH FLOOR, NEW YORK NY 10003 |
| Tristan Walker |
director |
330 WEST 34TH STREET, NEW YORK NY 10001 |
| Robert T Vivian |
director |
C/O SHAKE SHACK INC., 24 UNION SQUARE EAST, 5TH FLOOR, NEW YORK NY 10003 |
| Sumaiya Balbale |
director |
697 CALMAR AVENUE, OAKLAND CA 94610 |
| Select Equity Group, L.p. |
director, other: See Remarks |
380 LAFAYETTE STREET, 6TH FLOOR, NEW YORK NY 10003 |
| Green Equity Investors Vi, L.p. |
director, 10 percent owner |
11111 SANTA MONICA BOULEVARD, SUITE 2000, LOS ANGELES CA 90025 |
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