CAKE? Thanks, But I Will Pass…
The Cheesecake Factory Inc. (CAKE) is a leading restaurant company that averages more than $10mm in annual sales per unit, quite an impressive accomplishment. Like many restaurant stocks, it has been on a tear in 2013, up 25% despite a recent pullback following Q2 earnings. The stock is somewhat expensive, and the earnings growth is coming from share repurchases rather than improving fundamentals. I expect that CAKE will trade lower over the next few months and is likely to end up about where it is currently trading a year from now.
CAKE, headquartered in California, was founded in 1978 by current CEO David Overton (67) and his parents and operates 175 U.S. restaurants and 3 international locations through licensing. Most of the restaurants are The Cheescake Factory concept, but there are 11 Grand Lux Cafe and a single RockSugar Pan Asian Kitchen. While restaurant sales account for the vast majority of revenues, CAKE operates two bakeries that generate about 4% of sales.