Like Cheesecake Factory? These Two Insiders Do

As a table service restaurant Cheesecake Factory is best compared to peers such as Darden Restaurants, Inc. (NYSE:DRI), Brinker International, Inc. (NYSE:EAT), DineEquity Inc (NYSE:DIN), and Bloomin’ Brands Inc (NASDAQ:BLMN). These companies’ respective well-known brands include Red Lobster and Olive Garden; Chili’s; Applebee’s and IHOP; and Outback Steakhouse. Most of these stocks are cheaper on a trailing earnings basis; DineEquity and Darden’s P/Es are 10 and 13, while Brinker is valued at 17 times its trailing earnings. Darden’s most recent quarter showed a 37% decline in net income versus a year earlier despite higher revenue, while Brinker reported modest growth rates on both top and bottom lines. These three companies joined quick service restaurants such as McDonald’s Corporation (NYSE:MCD) in our list of the most popular restaurant stocks among hedge funds for the fourth quarter of 2012 (see more of the ten most popular restaurants among hedge funds). Bloomin’ Brands is priced for growth with a trailing P/E of 39, and its earnings have not been good recently. Analysts expect it to recover, and the forward P/E is only 13, but we would be skeptical of their optimism. Overall we would say that Cheesecake Factory doesn’t seem cheap for its industry, and we would at least want to dig into what problems it experienced in Q4 before deciding if it is worth its premium to other restaurants.

Disclosure: I own no shares of any stocks mentioned in this article.