The Cheesecake Factory  (CAKE)

Despite an overall decline in the family-dining sector, The Cheesecake Factory continues see revenue growth on a quarter-to-quarter basis. In the second quarter ended July 2, the company reported a 3.4% increase in revenue to $470.1 million compared to the same period a year earlier.

The Cheesecake Factory shares are 1.2% lower to $43.08, as of 3:25 p.m. ET. Overall, shares are lagging the S&P 500 which is down 0.71%.

TheStreet Ratings team rates The Cheesecake Factory as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate The Cheesecake Factory (CAKE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Even though revenue increased by 3.4% over the year-earlier period, the company underperformed as compared with the industry average of 4.6%. Yet this growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased 32.3% to $43.5 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.1%.
  • The Cheesecake Factory reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, The Cheesecake Factory increased its bottom line by earning $1.78 a share vs. earnings of $1.66 a share in 2011. This year, the market expects an improvement in earnings of $2.12 a share.
  • CAKE's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.78 is somewhat weak and could be cause for future problems.

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