The fourth quarter capped off a challenging fiscal 2004 for Restaurateur IHOP (NYSE:IHP), which has been undergoing a restructuring process. But the company continues to gain traction. Even though it saw a 5.3% year-over-year decrease in earnings per share, its net income increased 19% in the fourth quarter to $10.5 million compared with the same period a year ago. Its current earnings growth is due in large part to its systemwide sales, which climbed 16.6%, and same-store sales, which rose 4.3%.

But with an EPS of $1.61, IHOP's stock is trading at an extra-syrupy 30 times earnings. Is the market overeager for what amounts to little more than a house of pancakes?

Investors may be looking forward to IHOP's fiscal 2005 earnings, which the company projects to strengthen by 31% to a range of $2.02 to $2.12 per share. Additionally, its new franchise model will permit it to have reduced capital expenditures going forward. The change will result in substantially greater cash flows that are expected to be as much as $65 million for the upcoming year.

IHOP's $106.6 million in cash is offset by $133.8 million of long-term debt. But as its cash flow statement continues to improve, investors should see a substantial increase in the company's owner earnings (or structural free cash flow).

Despite the positives, though, the stock just isn't very attractive at the current price. And given the fierce egg-throwing among the competition, which includes Waffle House, Perkins, Bob Evans (NASDAQ:BOBE), and Cracker Barrel (NASDAQ:CBRL), IHOP lives in a tough market that could potentially pan-fry speculating investors.

IHOP's steep valuation at 22 times forward earnings is reason enough to waffle on this investment. If you're in the mood for pancakes, go to IHOP. But don't risk being pancaked by this expensive stock.

Fool contributor Jeremy MacNealy does not own shares in any company mentioned.