Intrinsic value of The Cheesecake Factory Incorporated - CAKE

Previous Close

$36.49

  Intrinsic Value

$9.74

stock screener

  Rating & Target

str. sell

-73%

Previous close

$36.49

 
Intrinsic value

$9.74

 
Up/down potential

-73%

 
Rating

str. sell

We calculate the intrinsic value of CAKE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,379
  2,433
  2,496
  2,566
  2,644
  2,729
  2,822
  2,923
  3,031
  3,148
  3,272
  3,405
  3,546
  3,696
  3,856
  4,025
  4,204
  4,393
  4,593
  4,804
  5,026
  5,261
  5,509
  5,770
  6,044
  6,333
  6,638
  6,958
  7,295
  7,650
Variable operating expenses, $m
  2,217
  2,268
  2,326
  2,391
  2,464
  2,543
  2,630
  2,723
  2,824
  2,933
  3,046
  3,169
  3,301
  3,441
  3,589
  3,747
  3,913
  4,089
  4,275
  4,472
  4,679
  4,898
  5,128
  5,371
  5,627
  5,896
  6,179
  6,477
  6,791
  7,121
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,217
  2,268
  2,326
  2,391
  2,464
  2,543
  2,630
  2,723
  2,824
  2,933
  3,046
  3,169
  3,301
  3,441
  3,589
  3,747
  3,913
  4,089
  4,275
  4,472
  4,679
  4,898
  5,128
  5,371
  5,627
  5,896
  6,179
  6,477
  6,791
  7,121
Operating income, $m
  162
  166
  170
  175
  180
  186
  192
  199
  207
  215
  226
  235
  245
  255
  267
  278
  291
  304
  317
  332
  347
  364
  381
  399
  418
  438
  459
  481
  504
  529
EBITDA, $m
  261
  267
  274
  282
  290
  299
  310
  321
  333
  345
  359
  374
  389
  406
  423
  442
  461
  482
  504
  527
  552
  577
  604
  633
  663
  695
  728
  763
  800
  839
Interest expense (income), $m
  6
  7
  16
  28
  42
  57
  74
  92
  112
  134
  157
  182
  209
  238
  268
  301
  335
  372
  410
  451
  494
  540
  588
  638
  692
  748
  807
  870
  936
  1,005
  1,077
Earnings before tax, $m
  155
  149
  142
  133
  123
  112
  100
  87
  73
  58
  44
  26
  7
  -13
  -34
  -57
  -81
  -107
  -134
  -162
  -192
  -224
  -258
  -293
  -330
  -370
  -411
  -455
  -500
  -549
Tax expense, $m
  42
  40
  38
  36
  33
  30
  27
  24
  20
  16
  12
  7
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  113
  109
  103
  97
  90
  82
  73
  64
  53
  42
  32
  19
  5
  -13
  -34
  -57
  -81
  -107
  -134
  -162
  -192
  -224
  -258
  -293
  -330
  -370
  -411
  -455
  -500
  -549

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,340
  1,371
  1,406
  1,446
  1,490
  1,538
  1,590
  1,647
  1,708
  1,773
  1,843
  1,918
  1,998
  2,083
  2,172
  2,268
  2,368
  2,475
  2,587
  2,706
  2,832
  2,964
  3,104
  3,250
  3,405
  3,568
  3,740
  3,920
  4,110
  4,310
Adjusted assets (=assets-cash), $m
  1,340
  1,371
  1,406
  1,446
  1,490
  1,538
  1,590
  1,647
  1,708
  1,773
  1,843
  1,918
  1,998
  2,083
  2,172
  2,268
  2,368
  2,475
  2,587
  2,706
  2,832
  2,964
  3,104
  3,250
  3,405
  3,568
  3,740
  3,920
  4,110
  4,310
Revenue / Adjusted assets
  1.775
  1.775
  1.775
  1.775
  1.774
  1.774
  1.775
  1.775
  1.775
  1.776
  1.775
  1.775
  1.775
  1.774
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
Average production assets, $m
  956
  978
  1,003
  1,032
  1,063
  1,097
  1,135
  1,175
  1,219
  1,265
  1,315
  1,369
  1,426
  1,486
  1,550
  1,618
  1,690
  1,766
  1,846
  1,931
  2,021
  2,115
  2,215
  2,319
  2,430
  2,546
  2,668
  2,797
  2,933
  3,075
Working capital, $m
  -252
  -258
  -265
  -272
  -280
  -289
  -299
  -310
  -321
  -334
  -347
  -361
  -376
  -392
  -409
  -427
  -446
  -466
  -487
  -509
  -533
  -558
  -584
  -612
  -641
  -671
  -704
  -738
  -773
  -811
Total debt, $m
  24
  41
  61
  84
  109
  136
  165
  197
  232
  269
  308
  351
  396
  444
  494
  548
  605
  665
  729
  796
  867
  942
  1,020
  1,103
  1,191
  1,283
  1,380
  1,482
  1,589
  1,702
Total liabilities, $m
  757
  775
  794
  817
  842
  869
  898
  930
  965
  1,002
  1,042
  1,084
  1,129
  1,177
  1,227
  1,281
  1,338
  1,398
  1,462
  1,529
  1,600
  1,675
  1,754
  1,837
  1,924
  2,016
  2,113
  2,215
  2,322
  2,435
Total equity, $m
  583
  596
  612
  629
  648
  669
  692
  716
  743
  771
  802
  834
  869
  906
  945
  986
  1,030
  1,077
  1,126
  1,177
  1,232
  1,289
  1,350
  1,414
  1,481
  1,552
  1,627
  1,705
  1,788
  1,875
Total liabilities and equity, $m
  1,340
  1,371
  1,406
  1,446
  1,490
  1,538
  1,590
  1,646
  1,708
  1,773
  1,844
  1,918
  1,998
  2,083
  2,172
  2,267
  2,368
  2,475
  2,588
  2,706
  2,832
  2,964
  3,104
  3,251
  3,405
  3,568
  3,740
  3,920
  4,110
  4,310
Debt-to-equity ratio
  0.040
  0.070
  0.100
  0.130
  0.170
  0.200
  0.240
  0.280
  0.310
  0.350
  0.380
  0.420
  0.460
  0.490
  0.520
  0.560
  0.590
  0.620
  0.650
  0.680
  0.700
  0.730
  0.760
  0.780
  0.800
  0.830
  0.850
  0.870
  0.890
  0.910
Adjusted equity ratio
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  113
  109
  103
  97
  90
  82
  73
  64
  53
  42
  32
  19
  5
  -13
  -34
  -57
  -81
  -107
  -134
  -162
  -192
  -224
  -258
  -293
  -330
  -370
  -411
  -455
  -500
  -549
Depreciation, amort., depletion, $m
  99
  101
  104
  107
  110
  113
  117
  121
  126
  130
  133
  138
  144
  150
  157
  163
  171
  178
  186
  195
  204
  214
  224
  234
  245
  257
  270
  283
  296
  311
Funds from operations, $m
  212
  210
  207
  204
  200
  196
  191
  185
  179
  173
  165
  157
  149
  137
  122
  106
  90
  72
  53
  33
  12
  -10
  -34
  -59
  -85
  -113
  -142
  -172
  -204
  -238
Change in working capital, $m
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
Cash from operations, $m
  217
  216
  214
  211
  208
  205
  200
  196
  191
  185
  178
  171
  164
  153
  139
  124
  109
  92
  74
  55
  35
  14
  -8
  -31
  -56
  -82
  -109
  -138
  -168
  -200
Maintenance CAPEX, $m
  -95
  -97
  -99
  -101
  -104
  -107
  -111
  -115
  -119
  -123
  -128
  -133
  -138
  -144
  -150
  -157
  -163
  -171
  -178
  -186
  -195
  -204
  -214
  -224
  -234
  -245
  -257
  -270
  -283
  -296
New CAPEX, $m
  -19
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -44
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -90
  -94
  -100
  -105
  -110
  -116
  -122
  -129
  -135
  -142
Cash from investing activities, $m
  -114
  -119
  -124
  -129
  -135
  -141
  -148
  -155
  -163
  -170
  -178
  -186
  -195
  -204
  -214
  -225
  -235
  -247
  -258
  -271
  -285
  -298
  -314
  -329
  -344
  -361
  -379
  -399
  -418
  -438
Free cash flow, $m
  103
  98
  90
  82
  73
  63
  52
  41
  28
  15
  0
  -15
  -31
  -51
  -75
  -100
  -127
  -155
  -185
  -216
  -249
  -284
  -321
  -360
  -401
  -444
  -489
  -536
  -587
  -639
Issuance/(repayment) of debt, $m
  14
  17
  20
  22
  25
  27
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
  113
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  13
  29
  50
  73
  98
  125
  153
  183
  214
  247
  282
  318
  357
  398
  441
  486
  533
  583
  636
Cash from financing (excl. dividends), $m  
  14
  17
  20
  22
  25
  27
  30
  32
  35
  37
  40
  55
  74
  98
  124
  152
  182
  213
  247
  281
  318
  357
  397
  440
  485
  533
  583
  635
  690
  749
Total cash flow (excl. dividends), $m
  117
  115
  110
  104
  98
  90
  82
  73
  63
  52
  40
  41
  44
  46
  49
  52
  55
  58
  62
  65
  69
  72
  76
  80
  85
  89
  94
  99
  104
  109
Retained Cash Flow (-), $m
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -30
  -33
  -35
  -50
  -73
  -98
  -125
  -153
  -183
  -214
  -247
  -282
  -318
  -357
  -398
  -441
  -486
  -533
  -583
  -636
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  105
  102
  95
  87
  78
  69
  59
  48
  36
  24
  9
  8
  9
  -3
  -24
  -46
  -70
  -95
  -121
  -149
  -178
  -209
  -242
  -277
  -313
  -351
  -392
  -434
  -479
  -526
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  101
  93
  82
  72
  61
  50
  40
  30
  21
  12
  4
  4
  3
  -1
  -7
  -12
  -15
  -17
  -19
  -19
  -18
  -17
  -16
  -14
  -12
  -10
  -8
  -7
  -5
  -4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.4
  98.2
  96.3
  93.7
  90.4
  86.6
  82.3
  77.8
  72.9
  68.0
  63.0
  58.0
  53.1
  48.4
  43.9
  39.6
  35.5
  31.7
  28.3

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.

FINANCIAL RATIOS  of  The Cheesecake Factory Incorporated (CAKE)

Valuation Ratios
P/E Ratio 12.5
Price to Sales 0.8
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate 8.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 1.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 33
Management Effectiveness
Return On Assets 11.3%
Ret/ On Assets - 3 Yr. Avg. 10.2%
Return On Total Capital 23.3%
Ret/ On T. Cap. - 3 Yr. Avg. 20.5%
Return On Equity 23.3%
Return On Equity - 3 Yr. Avg. 20.5%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 76.8%
Gross Margin - 3 Yr. Avg. 76%
EBITDA Margin 12.6%
EBITDA Margin - 3 Yr. Avg. 12%
Operating Margin 8.8%
Oper. Margin - 3 Yr. Avg. 8%
Pre-Tax Margin 8.4%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 27.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.1%
Payout Ratio 30.2%

CAKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CAKE stock intrinsic value calculation we used $2332 million for the last fiscal year's total revenue generated by The Cheesecake Factory Incorporated. The default revenue input number comes from 0001 income statement of The Cheesecake Factory Incorporated. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CAKE stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CAKE is calculated based on our internal credit rating of The Cheesecake Factory Incorporated, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of The Cheesecake Factory Incorporated.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CAKE stock the variable cost ratio is equal to 93.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CAKE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 67.8% for The Cheesecake Factory Incorporated.

Corporate tax rate of 27% is the nominal tax rate for The Cheesecake Factory Incorporated. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CAKE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CAKE are equal to 40.2%.

Life of production assets of 9.9 years is the average useful life of capital assets used in The Cheesecake Factory Incorporated operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CAKE is equal to -10.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $571.059 million for The Cheesecake Factory Incorporated - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 45.033 million for The Cheesecake Factory Incorporated is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of The Cheesecake Factory Incorporated at the current share price and the inputted number of shares is $1.6 billion.

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