Critical Review: The Cheesecake Factory (NASDAQ:CAKE) versus Aramark (ARMK)
The Cheesecake Factory (NASDAQ: CAKE) and Aramark (NYSE:ARMK) are both mid-cap retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, profitabiliy, dividends, institutional ownership and earnings.
Institutional and Insider Ownership
96.4% of The Cheesecake Factory shares are owned by institutional investors. Comparatively, 95.9% of Aramark shares are owned by institutional investors. 8.5% of The Cheesecake Factory shares are owned by company insiders. Comparatively, 2.9% of Aramark shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
The Cheesecake Factory pays an annual dividend of $0.96 per share and has a dividend yield of 2.1%. Aramark pays an annual dividend of $0.41 per share and has a dividend yield of 1.0%. The Cheesecake Factory pays out 33.7% of its earnings in the form of a dividend. Aramark pays out 29.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Aramark has raised its dividend for 2 consecutive years.
Volatility & Risk
The Cheesecake Factory has a beta of 0.31, suggesting that its stock price is 69% less volatile than the S&P 500. Comparatively, Aramark has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500.
This is a breakdown of recent ratings and recommmendations for The Cheesecake Factory and Aramark, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|The Cheesecake Factory||1||12||5||0||2.22|
The Cheesecake Factory presently has a consensus price target of $54.59, suggesting a potential upside of 21.47%. Aramark has a consensus price target of $43.33, suggesting a potential upside of 8.17%. Given The Cheesecake Factory’s higher possible upside, analysts plainly believe The Cheesecake Factory is more favorable than Aramark.
This table compares The Cheesecake Factory and Aramark’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|The Cheesecake Factory||6.10%||22.92%||11.11%|
Earnings and Valuation
This table compares The Cheesecake Factory and Aramark’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|The Cheesecake Factory||$2.30 billion||0.90||$283.81 million||$2.85||15.77|
|Aramark||$14.49 billion||0.67||$1.30 billion||$1.37||29.24|
Aramark has higher revenue and earnings than The Cheesecake Factory. The Cheesecake Factory is trading at a lower price-to-earnings ratio than Aramark, indicating that it is currently the more affordable of the two stocks.
About The Cheesecake Factory
The Cheesecake Factory Incorporated is engaged in the restaurant and bakery business. As of March 2, 2017, the Company operated 208 Company-owned restaurants: 194 under The Cheesecake Factory mark, 13 under the Grand Lux Cafe mark and one under the Rock Sugar Pan Asian Kitchen mark. The Company’s segments include The Cheesecake Factory restaurants, and other. It also operates bakery production facilities, which produce desserts for its restaurants, international licensees and third-party bakery customers. Its restaurants offer lunch and dinner, as well as Sunday brunch. Its restaurants also offer a bar. As of January 3, 2017, its menu consisted of over 200 items in addition to items presented on supplemental menus, such as its SkinnyLicious menu, which offers approximately 50 items. Its Grand Lux Cafe is a casual dining concept that offers artisan cuisine. It offers appetizers, seafood and steaks.
Aramark is a global provider of food, facilities and uniform services to education, healthcare, business and industry, and sports, leisure and corrections clients. The Company operates through three segments: Food and Support Services North America (FSS North America), Food and Support Services International (FSS International), and Uniform and Career Apparel (Uniform). FSS North America and FSS International segments include food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities. The Uniform segment includes rental, sale, cleaning, maintenance and delivery of personalized uniforms and other textile items to clients in a range of industries in the United States, Puerto Rico, Japan and Canada, including manufacturing, transportation, construction, restaurants and hotels, healthcare and pharmaceutical industries.
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