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Comparing The Cheesecake Factory’s Performance with Its Peers’

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CAKE and its peers’ five-year stock performances

Having discussed the fundamentals and valuation multiples of The Cheesecake Factory (CAKE), let’s now discuss the returns delivered by CAKE and its peers over the last five years.

Comparing Share Performance of The Cheesecake Factory with Its Peers

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CAKE’s stock performance

If you had invested $100 in The Cheesecake Factory on May 27, 2011, it would have become $157.8 by May 29, 2016, at a compound annual growth rate of 9.7%. During the same period, CAKE’s peers Darden Restaurants (DRI), Texas Roadhouse (TXRH), Brinker International (EAT), and Buffalo Wild Wings (BWLD) returned 5.8%, 21.8%, 11.7%, and 17.8%, respectively.

In the last five years, CAKE’s same-store sales growth has mainly been driven by rises in its menu prices, which failed to impress investors. Growth through menu price rises is not sustainable, as the company can’t increase its menu prices continuously in a competitive market.

The price rises also failed to improve CAKE’s operating margins, indicating a rise in its operating costs. This has made investors skeptical about the company’s future earnings.

Better-than-expected 1Q15 and 2Q15 results pushed CAKE’s share price up. It reached a peak value of $58.2 on August 5, 2015. However, since then, downward momentum has threatened CAKE’s future earnings due to concerns over minimum wage increases and falling same-store sales growth.

CAKE forms 0.15% of the holdings of the iShares S&P Mid-Cap 400 Value ETF (IJJ).

CAKE’s EPS over the last five years

CAKE’s earnings per share (or EPS) rose 44.5% from $1.6 in 2011 to $2.4 in 2015. CAKE’s rising revenues and share repurchases boosted its EPS. During the same period, CAKE’s peers Darden International (DRI), Brinker International (EAT), and Texas Roadhouse (TXRH) registered EPS rises of 0.6%, 87%, and 57%, respectively.

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