Is Now The Time To Look At Buying The Cheesecake Factory Incorporated (NASDAQ:CAKE)?

The Cheesecake Factory Incorporated (NASDAQ:CAKE), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$68.51 and falling to the lows of US$55.93. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cheesecake Factory's current trading price of US$60.11 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cheesecake Factory’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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Is Cheesecake Factory Still Cheap?

Great news for investors – Cheesecake Factory is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.84x is currently well-below the industry average of 23.92x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Cheesecake Factory’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

See our latest analysis for Cheesecake Factory

What kind of growth will Cheesecake Factory generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Cheesecake Factory's earnings over the next few years are expected to increase by 36%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since CAKE is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CAKE for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CAKE. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

If you'd like to know more about Cheesecake Factory as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for Cheesecake Factory and we think they deserve your attention.

If you are no longer interested in Cheesecake Factory, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.