Attention, sweet-teeth! Cheesecake Factory
Wall Street Wisdom:
- General consensus. Of the 22 analysts following Cheesecake Factory, nine of them rate the stock a hold; 12 buys outnumber a single sell.
- Revenues. Tomorrow's sales report is expected to trounce the year-ago numbers handily, with a 24% rise to $330.7 million.
- Earnings. Analysts believe that profits grew nearly as much as did revenues, up 21% year over year to $0.29 per share.
Margin watch:
After enduring a bit of a slowdown in 2004 in both profitability and share price appreciation, Cheesecake revived in 2005. The analysts' expectations for tomorrow suggest they saw no signs of a slowdown in the fourth quarter.
|
Margins % |
6/04 |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
|---|---|---|---|---|---|---|
|
Gross |
43.3 |
42.9 |
42.7 |
42.8 |
43 |
43.2 |
|
Op. |
10.7 |
10.4 |
10.5 |
10.3 |
10.6 |
11 |
|
Net |
7.3 |
6.7 |
6.9 |
6.8 |
7 |
7.5 |
Valuation metrics:
There's no arguing that Cheesecake Factory is not a successful business. Over the past five years, the company has averaged compound annual sales growth in the low 20s, and profits growth to match. The only question, really, is whether investors today are paying too high a price for Cheesecake Factory's past success. The stock trades for 36 times trailing earnings and (as a result of its rapid, cash-consuming expansion) 188 times trailing free cash flow. Yet analysts project that long-term growth will only match the past average of about 20% per annum. Cheesecake Factory's meals may not be overpriced, but its stock sure is looking that way.
Competitors:
There's no lack of competition in the restaurant industry. Cheesecake Factory's primary publicly traded competitors appear to be Brinker
Fool contributor Rich Smith does not own shares of any company named above.
