The Cheesecake Factory Incorporated (NASDAQ:CAKE), a hospitality company based in United States, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $50.89 and falling to the lows of $44.5. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Cheesecake Factory’s current trading price of $45.44 reflective of the actual value of the small-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. View our latest analysis for Cheesecake Factory
What is Cheesecake Factory worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.47% below my intrinsic value, which means if you buy Cheesecake Factory today, you’d be paying a fair price for it. And if you believe that the stock is really worth $47.57, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Cheesecake Factory’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Cheesecake Factory?
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. Though in the case of Cheesecake Factory, it is expected to deliver a negative earnings growth of -3.03%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, CAKE appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on CAKE for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CAKE should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cheesecake Factory. You can find everything you need to know about Cheesecake Factory in the latest infographic research report. If you are no longer interested in Cheesecake Factory, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.