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The Cheesecake Factory Incorporated (CAKE), Brinker International, Inc. (EAT), Darden Restaurants, Inc. (DRI): Dig in to This “Penny” Stock: A SWOT Analysis

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Upscale casual dining restaurant The Cheesecake Factory Incorporated (NASDAQ:CAKE) has been whetting investors’ appetites recently with a gain of 30.82% this last year.

The Cheesecake Factory Incorporated (NASDAQ:CAKE) is known to many as the workplace of Big Bang Theory‘s Penny where she waits tables in Pasadena until her big break in Hollywood.

The Cheesecake Factory Incorporated (NASDAQ:CAKE)

Of interest is that general managers get a new BMW lease every three years. Maybe Penny should try for a promotion… she would also receive bonuses and stock!

Is the stock worth it for Penny? Or you?

Strengths

The company reported Q1 earnings in April that their comp sales were positive for 13 consecutive quarters. Averaged over two years the sales comp is 3.8%.

Fellow Fool Ted Cooper gives the restaurant props for inventory efficiency in the casual dining space, outperforming rivals Brinker International, Inc. (NYSE:EAT) and Darden Restaurants, Inc. (NYSE:DRI).

The Cheesecake Factory Incorporated (NASDAQ:CAKE) are generally located in or adjacent to upscale malls, being at the high end of casual dining with a huge menu of over 200 options (which Penny has yet to memorize).

Analysts expect 13.84% five year EPS growth for The Cheesecake Factory Incorporated (NASDAQ:CAKE). This is twice as high as the growth rate for Darden Restaurants, Inc. (NYSE:DRI) at 6.95%.

It trades at 3.70 times book which is lower than Brinker International, Inc. (NYSE:EAT) at 11.22, but higher than Darden Restaurants, Inc. (NYSE:DRI) at 3.18.

The company was named two years straight as Most Preferred Casual Dining Restaurant based on customer votes by Nation’s Restaurant News Consumer Picks.

The Cheesecake Factory Incorporated (NASDAQ:CAKE) has improved operating margins by 260 basis points since 2009, with 50 basis points betterment in 2012 and another 50 basis points improvement expected in 2013.

The company has strong insider conviction at 5% plus. CEO Overton holds 120,000 shares.

Weaknesses

The stock hit a multi-year high of $42.60 on July 1, exceeding its median price target of $42.00. The P/E stands at 22.55 with a trailing P/E of 17.25. The short interest at 12.80% is growing as the stock rises.

Analysts are neutral with 18 Holds, 1 Underperform, 5 Buys, and 3 Strong Buys.

It offers a yield of 1.10% with a trailing P/E of 22.48. This is lower than rivals Darden Restaurants, Inc. (NYSE:DRI) at 4% and Brinker International, Inc. (NYSE:EAT) at 2.00%. Its PEG is 1.40.

Those manager benefits may seem out of line as many industries, especially restaurants have dropped such perks, but according to CEO David Overton manager retention is in line or above last year’s levels. While Penny has been working at the The Cheesecake Factory Incorporated (NASDAQ:CAKE) for six TV seasons the average general manager works there for a decade. Is it a strength or a weakness… you decide.

Opportunities

The company owns 162 restaurants mostly in the US with plans to expand to 300. The company is opening another 8-10 US company-owned restaurants this year.

Sales at its three restaurants in the Middle East were reported to be strong on the Q1conference call delivering higher than expected sales volumes. Each of those three restaurants adds $0.01 per share to earnings. The company is looking to expand to Asia once it finds partners. Within eight years the company has agreements in place for a minimum of a dozen openings in Mexico and Chile. The company plans three international openings this year.

Soon offering up to 70 gluten-free options. Unless you’ve been hiding under a rock, gluten-free is one of the biggest trends in food this year thanks to diet plans like the popular Paleo diet.

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