The Cheesecake Factory: The Best Balance Sheet In The Restaurant Industry

Usually, restaurant stocks are not something to get excited about if you are looking to hold the stock for awhile. The industry itself experiences over 90% failure, and the only real success story (from the perspective of making investors reliably rich) has been McDonald’s. Investors considering a restaurant stock find themselves in the following dilemma: Either the restaurant is the next big hot thing and the valuation goes to something crazy like 100x profits to price in many future years of growth already, or a company has fallen out of fashion and can only stimulate earnings per share by opening up new stores rather than making existing restaurants more profitable which usually leads to terminal growth in the 1-4% or worse (declining sales and a cheap private equity buyout).

And that is why, when I started to study the stock of the Cheesecake Factory, I was pleasantly surprised by what … Read the rest of this article!