Does Cheesecake Factory Still Have Room to Run After a 36% Yearly Surge?

If you are weighing your next move with Cheesecake Factory stock, you are not alone. After all, with shares closing most recently at $56.15, many investors are curious whether this restaurant chain has even more upside, or if it is time to be cautious after the impressive multi-year climb. Cheesecake Factory is up 4.0% just in the last week and 2.2% over the past month. Looking broader, year-to-date performance stands at a strong 15.8%. What really grabs attention is the long-term picture: a one-year return of 36.3%, 68.3% over three years, and an eye-catching 108.6% over five. Momentum like this does not happen by accident.

Lately, industry analysts have been buzzing about Cheesecake Factory's expansion into new markets and its ability to keep guest traffic steady despite macroeconomic headwinds. In addition, strategic partnerships and menu innovations have kept the brand in the spotlight, contributing to shifts in investor sentiment. Some market watchers connect the recent price gains with fresh optimism about the brand’s adaptability in a changing restaurant space. Still, with all this good news, plenty of investors are asking how much is already reflected in the stock price.

If you are wondering whether Cheesecake Factory is undervalued, fairly priced, or leaning toward expensive, valuation metrics can help clear things up. According to our analysis, Cheesecake Factory passes 3 out of 6 key undervaluation checks, earning a value score of 3. In the next section, we will break down exactly what that means by walking through each valuation approach. Stay tuned, as at the end we will also introduce an even smarter way to decide if Cheesecake Factory deserves a spot in your portfolio.

Cheesecake Factory delivered 36.3% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Cheesecake Factory Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by forecasting a company’s expected future cash flows and then discounting those back to today’s dollars to calculate the business’s present, intrinsic value. This helps investors see if a stock’s current price matches its long-term cash generation potential.

For Cheesecake Factory, recent trailing twelve-month Free Cash Flow stands at $148.1 million. Analyst projections suggest that free cash flow will fluctuate over coming years, with 2027’s expected cash flow at $132 million. While direct analyst estimates cover up to five years ahead, Simply Wall St extrapolates further and projects around $155.8 million by 2035. All estimates are in US dollars.

After discounting these figures back to today, the DCF model calculates an intrinsic value of $33.50 per share. Compared to the current price of $56.15, this suggests Cheesecake Factory stock is trading at a 67.6% premium to its estimated fair value. Based on cash flow fundamentals, the DCF model indicates that the stock is significantly overvalued at its latest price.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Cheesecake Factory.

Our Discounted Cash Flow (DCF) analysis suggests Cheesecake Factory may be overvalued by 67.6%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Cheesecake Factory Price vs Earnings (PE Ratio)

For profitable companies like Cheesecake Factory, the Price-to-Earnings (PE) ratio is a widely used tool to evaluate whether a stock trades at an attractive level relative to its earnings power. The logic is simple: the PE shows how much investors are willing to pay today for one dollar of current earnings. Growth expectations and risk both play roles in where a “normal” or reasonable PE lands. Companies with stronger growth or lower perceived risk typically command higher multiples, while slower or unstable performers trade at discounts.

Cheesecake Factory’s current PE ratio stands at 17.6x. For context, the average PE across the hospitality industry is higher at 23.9x, while the average among the company’s immediate peers comes in at 60.5x. At first glance, this puts Cheesecake Factory’s valuation below both its industry and peer benchmarks, possibly signaling a bargain.

However, Simply Wall St’s proprietary “Fair Ratio” refines this analysis. This metric incorporates multiple variables like expected earnings growth, risks, profit margins, size, and industry context to arrive at a PE ratio tailored specifically for the company. For Cheesecake Factory, the Fair Ratio is determined to be 21.9x. This nuanced benchmark is more insightful than a simple peer comparison because it considers the company’s unique prospects and potential challenges, allowing for a more apples-to-apples valuation.

Comparing the Fair Ratio (21.9x) with the actual PE (17.6x), Cheesecake Factory’s stock currently looks undervalued by this measure.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Cheesecake Factory Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personalized story of where you think Cheesecake Factory is headed, blending your expectations for its future revenue, profit margins, and fair value with your view on the company’s strategy and potential. Narratives make investing easier by connecting the dots between the company’s journey, your financial forecasts, and a dynamic fair value. This provides a holistic way to evaluate a stock beyond just numbers.

On Simply Wall St’s platform, millions of investors use Narratives within the Community page to track and update their investment ideas. Using Narratives, you can quickly see how your fair value stacks up against current prices, so you know if it is time to buy, sell, or wait. As news breaks or earnings are released, your Narrative is updated automatically so you can act confidently with up-to-date information in real time.

For example, some investors are optimistic and see the future fair value for Cheesecake Factory as high as $317.75 per share, while others are more cautious, with targets as low as $47.00. Narratives make it easy to see all these perspectives and choose the one that fits your outlook best.

Do you think there's more to the story for Cheesecake Factory? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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