Analyzing The Cheesecake Factory (CAKE) & Ruth’s Hospitality Group (RUTH)
Ruth’s Hospitality Group (NASDAQ: RUTH) and The Cheesecake Factory (NASDAQ:CAKE) are both retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, risk, institutional ownership, dividends, profitabiliy, valuation and analyst recommendations.
This table compares Ruth’s Hospitality Group and The Cheesecake Factory’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Ruth’s Hospitality Group||7.89%||37.75%||15.46%|
|The Cheesecake Factory||6.15%||23.35%||11.34%|
Ruth’s Hospitality Group pays an annual dividend of $0.36 per share and has a dividend yield of 1.7%. The Cheesecake Factory pays an annual dividend of $0.96 per share and has a dividend yield of 1.9%. Ruth’s Hospitality Group pays out 37.1% of its earnings in the form of a dividend. The Cheesecake Factory pays out 33.7% 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. The Cheesecake Factory is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a breakdown of recent ratings and recommmendations for Ruth’s Hospitality Group and The Cheesecake Factory, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Ruth’s Hospitality Group||0||3||1||0||2.25|
|The Cheesecake Factory||2||11||4||0||2.12|
Ruth’s Hospitality Group currently has a consensus price target of $20.75, indicating a potential upside of 0.00%. The Cheesecake Factory has a consensus price target of $56.75, indicating a potential upside of 13.93%. Given The Cheesecake Factory’s higher probable upside, analysts clearly believe The Cheesecake Factory is more favorable than Ruth’s Hospitality Group.
Valuation & Earnings
This table compares Ruth’s Hospitality Group and The Cheesecake Factory’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Ruth’s Hospitality Group||$389.60 million||1.63||$61.21 million||$0.97||21.39|
|The Cheesecake Factory||$2.29 billion||1.00||$286.60 million||$2.85||17.48|
The Cheesecake Factory has higher revenue and earnings than Ruth’s Hospitality Group. The Cheesecake Factory is trading at a lower price-to-earnings ratio than Ruth’s Hospitality Group, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
84.8% of Ruth’s Hospitality Group shares are held by institutional investors. Comparatively, 97.0% of The Cheesecake Factory shares are held by institutional investors. 6.7% of Ruth’s Hospitality Group shares are held by insiders. Comparatively, 8.5% of The Cheesecake Factory shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Risk and Volatility
Ruth’s Hospitality Group has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500. Comparatively, The Cheesecake Factory has a beta of 0.33, indicating that its stock price is 67% less volatile than the S&P 500.
The Cheesecake Factory beats Ruth’s Hospitality Group on 10 of the 16 factors compared between the two stocks.
Ruth’s Hospitality Group Company Profile
Ruth’s Hospitality Group, Inc. develops and operates fine dining restaurants under the name, Ruth’s Chris Steak House. The Company operates through two segments. As of December 25, 2016, the Company-owned steakhouse restaurant segment included 68 Ruth’s Chris Steak House restaurants and one Ruth’s Chris Steak House restaurant, and the franchise operations segment included 81 franchisee-owned Ruth’s Chris Steak House restaurants. Its restaurant’s menu features a selection of Prime and Choice grade steaks, and other offerings. Its menu also includes lamb chops, fish, shrimp, crab, chicken and lobster. Its Ruth’s Chris restaurants offer 10 to 13 appetizer items, including Orleans-style barbequed shrimp, mushrooms stuffed with crabmeat, lobster bisque and osso bucco ravioli. It also offers a range of potatoes and vegetables as side dishes. For dessert, creme brulee, white chocolate bread pudding, cheesecake, fresh seasonal berries with sweet cream sauce and other selections are available.
The Cheesecake Factory Company Profile
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.
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