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Trade at Discount
Compared to its own peers and its historical level, it traded at 52-week low price. However, adjusted for unusual and nonrecurring items, it is not doing way worse than its peers. Compare to the industry, CAKE continuously outperform the industry.
- Adopt labor cost management analytics & market-based pricing against fast wage growth
High labor costs bite the company`s profits. According to the management, three costs (labor, medical, and legal) played a major role in its unsatisfying results. “To help address the upward pressure on labor costs, we are deploying enhanced labor-management analytics to provide additional visibility to our restaurant managers and detailed staffing needs by position and market-based wage rates, as well as more granularity on overtime levels,” said CEO Matthew Clark. He added that the company would also employ market-based pricing strategies in higher-wage markets, meaning consumers in cities like San Francisco, Seattle, and Washington D.C., could see slight price increases in the coming months.
- Opportunity for domestic and international expansion
The company plans to open 5 to 6 new units in 2019 (Site-based strategy, focusing on A level malls) and contributes 1 to 2% to the top line growth. Especially, international license (China & Saudi Arabia) adds an average of 1 cent per restaurant in EPS with 0 capital expenditure.
Majority of analysts (88%) have a hold opinion on Cheesecake Factory.
Building the initial position as described in the investment strategy. U.S. mid-cap company operating in the consumer sector. This stock has a low volatility (beta 0,70) and acceptable dividend yield (2,87 %). We think that the stock is now correctly priced, but we also see some long-term growth potential outside the U.S. for this company. Long position.