Critical Review: Cheesecake Factory (CAKE) versus The Competition

Cheesecake Factory (NASDAQ:CAKE) is one of 383 publicly-traded companies in the “Hotels, Restaurants & Leisure” industry, but how does it compare to its competitors? We will compare Cheesecake Factory to related businesses based on the strength of its risk, valuation, institutional ownership, profitability, earnings, analyst recommendations and dividends.

Profitability

This table compares Cheesecake Factory and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cheesecake Factory	5.20%	44.53%	6.66%
Cheesecake Factory Competitors	8.51%	-42.06%	2.05%

Dividends

Cheesecake Factory pays an annual dividend of $1.20 per share and has a dividend yield of 1.1%. Cheesecake Factory pays out 28.4% of its earnings in the form of a dividend. As a group, “Hotels, Restaurants & Leisure” companies pay a dividend yield of 3.2% and pay out 38.9% of their earnings in the form of a dividend.

Volatility and Risk

Cheesecake Factory has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500. Comparatively, Cheesecake Factory’s competitors have a beta of 1.44, suggesting that their average stock price is 44% more volatile than the S&P 500.

Insider & Institutional Ownership

94.5% of Cheesecake Factory shares are held by institutional investors. Comparatively, 48.6% of shares of all “Hotels, Restaurants & Leisure” companies are held by institutional investors. 8.0% of Cheesecake Factory shares are held by company insiders. Comparatively, 22.0% of shares of all “Hotels, Restaurants & Leisure” companies are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Cheesecake Factory and its competitors gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Cheesecake Factory	$3.75 billion	$148.43 million	25.17
Cheesecake Factory Competitors	$3.42 billion	$250.18 million	-161.20

Cheesecake Factory has higher revenue, but lower earnings than its competitors. Cheesecake Factory is trading at a higher price-to-earnings ratio than its competitors, indicating that it is currently more expensive than other companies in its industry.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Cheesecake Factory and its competitors, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cheesecake Factory	2	12	5	1	2.25
Cheesecake Factory Competitors	3832	17319	25640	908	2.50

Cheesecake Factory presently has a consensus price target of $95.47, suggesting a potential downside of 10.11%. As a group, “Hotels, Restaurants & Leisure” companies have a potential upside of 53.76%. Given Cheesecake Factory’s competitors stronger consensus rating and higher probable upside, analysts clearly believe Cheesecake Factory has less favorable growth aspects than its competitors.

Summary

Cheesecake Factory competitors beat Cheesecake Factory on 8 of the 15 factors compared.

Cheesecake Factory Company Profile

The Cheesecake Factory Incorporated (NASDAQ: CAKE) is a restaurant company that operates and licenses restaurants under several brands. Its portfolio includes The Cheesecake Factory, North Italia and restaurants developed by Fox Restaurant Concepts, such as Flower Child and Culinary Dropout. The company’s restaurants serve a range of dishes, including appetizers, entrees and desserts. Its bakery division produces cheesecakes and other baked goods for its restaurants and for foodservice and retail customers.