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The Cheesecake Factory Incorporated (NASDAQ:CAKE): Are Analysts Bullish?

Simply Wall St

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In January 2019, The Cheesecake Factory Incorporated (NASDAQ:CAKE) released its latest earnings announcement, which revealed that the business experienced a immense headwind with earnings falling by -37%. Below, I've laid out key numbers on how market analysts perceive Cheesecake Factory's earnings growth trajectory over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

View our latest analysis for Cheesecake Factory

Analysts' expectations for the coming year seems positive, with earnings expanding by a robust 19%. This growth seems to continue into the following year with rates reaching double digit 25% compared to today’s earnings, and finally hitting US$124m by 2022.

NasdaqGS:CAKE Past and Future Earnings, March 27th 2019

Even though it’s helpful to understand the rate of growth each year relative to today’s value, it may be more valuable evaluating the rate at which the company is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Cheesecake Factory's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.9%. This means, we can assume Cheesecake Factory will grow its earnings by 7.9% every year for the next few years.

Next Steps:

For Cheesecake Factory, I've put together three essential aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is CAKE worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CAKE is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CAKE? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.