The Cheesecake Factory Incorporated (NASDAQ:CAKE), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Cheesecake Factory’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Cheesecake Factory
What is Cheesecake Factory worth?
According to my valuation model, Cheesecake Factory seems to be fairly priced at around 11.72% above my intrinsic value, which means if you buy Cheesecake Factory today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $50.23, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Cheesecake Factory’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Cheesecake Factory generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by 59% over the next couple of years, the future seems bright for Cheesecake Factory. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CAKE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on CAKE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Cheesecake Factory is showing 4 warning signs in our investment analysis and 1 of those can't be ignored...
If you are no longer interested in Cheesecake Factory, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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March 06, 2021 at 12:15AM
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Is It Time To Consider Buying The Cheesecake Factory Incorporated (NASDAQ:CAKE)? - Yahoo Finance
"Factory" - Google News
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