One of the most important lessons of famed investor Peter Lynch was that investors should invest in businesses they know about.

Lynch did so successfully many times in consumer-facing businesses where he was a customer. This has historically been an excellent recipe for investment success.

While the most significant returns in the stock market have mostly come from technology stocks, consumer concepts have also produced some of the largest returns of all time.

This week’s HX Trader idea is one of these kinds of companies.

It's a young – yet well-loved – consumer brand seeing rapid growth.

We bet that many of you are familiar with the company, and this is your chance to bite into some potential profits.

Here is the idea…

The company is the fast-casual burger restaurant chain Shake Shack Inc. (NASDAQ: SHAK).

This 400-outlet global chain began as a simple hot dog stand in Madison Square Park in New York City that celebrity chef Danny Meyer opened. They quickly added burgers, and soon, there were lines around the block looking for their high-quality take on "fast" food.

From the original stand that opened in 2001, they began adding new restaurants in 2010 and eventually took the company public in 2015. The concept has been a massive hit as their restaurants average more than $5 million in revenue per store or double an average McDonald's.

After the IPO, the company saw good growth but then stumbled into the COVID period. Since COVID, however, they have seen strong growth in earnings.

 Below is the table showing their results for earnings per share or “EPS” …

The company has gone from losing money to a nice profit and continuing to post strong growth.

Since COVID, they have also managed to post strong and consistent results. The company has had an admirable track record of beating analyst estimates on its earnings reports.

Here is the table showing those results over the last half-decade…

There is a lot of "NA" on the table above as they were reporting versus expectations of a loss, but we have kept the results in green to signify they exceeded those expectations. The table shows they have beaten every quarter in the last five years.

Analysts must raise their estimates when a company beats every result for five years. When analysts do this, it is called “positive earnings revisions,” and it is the single factor most correlated to a higher stock price.

Here is a chart showing the stock price over the last few years, along with the analyst estimates for 2025 EPS…

After bottoming at the end of 2023, the company has seen substantial EPS revisions. Estimates have moved up fivefold from $0.25 to $1.25 per share. This is a BIG move!

Looking at the chart, you can see that the stock has followed the estimates and moved much higher.

The last five years of outstanding results have helped power the stock higher. Here is the chart of the stock price over that period…

Earnings estimates have gone up five-fold, and at a recent high of almost $140 per share, the stock has gone up by almost as much.

Recently, though, the stock has sold off. It has fallen -15% in the last few months.

Here is a short-term chart along with our key technical indicator – the relative strength index or “RSI” …

Why is the stock down so much?

On January 13, with the stock near its highs, the company gave updated three-year guidance before an investor conference.

The guidance was for continued strong growth but was considered conservative by some investors and disappointed others with the stock at its highs.

Look at the company's track record above, and you can see that they have done a great job managing expectations. We think this guidance is part of that pattern.

Historically, when the stock has triggered our RSI "buy" signal (trading below an RSI of 30 and back above it), the stock has performed well in the future.

Here is a table showing those results…

Looking out three months, the stock is usually up with strong double-digit returns.

With the company reporting tomorrow, we think they will continue their strong track record of beating results.

We think it is time to order up some shares of the stock with extra fries on the side!