THE CHEESECAKE FACTORY INCORPORATED (CAKE): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/CAKE

Headline

Field	Value
Ticker	CAKE
Company	THE CHEESECAKE FACTORY INCORPORATED
Sector / Industry	Consumer Cyclical
Current price	$99.98/sh
Composition	The Cheesecake Factory restaurants 72% / North Italia 9% / Other FRC 9% / Other 10%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	4.3%
Operating margin today	5.0%
Margin compression (value-band)	-0.7pp
Implied growth	21.8%
Multiple paid	36x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~9.4pp.

Reconcile: at the x-ray's 9.3% required return this reads ~7.4 years; the models below use their own rates.

How unusual the bet is: within-range

Reference	Value
vs own history	+0.45σ
sustained it ~5 years at this level	35%
implied end-window share	0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	2.28x	4	expensive
Earnings	2.00x	2	expensive
Relative	1.41x	5	expensive
Growth	1.44x	3	expensive

Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=14)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$50.43	1.98x	yes	FCF base $0.2B, growth 5% (input: historical growth), terminal g 4.0%, WACC 7.9%, 6yr projection
DCF Exit Multiple	Growth	$80.69	1.24x	yes	Exit EV/EBITDA: 20.8x / 22.8x / 24.8x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	$84.25	1.19x	yes	P/E 28x (static sector reference · 2026-04), scenarios: 23.4x / 28.0x / 32.6x (bear / base = reference held flat / bull), EV/EBITDA 18x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$35.91	2.78x	yes	BV/sh $9.24, ROE (TTM) 35.9%, ke 9.3%
Two-Stage Excess Return	Asset	$76.13	1.31x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$69.42	1.44x	yes	Rev $3.8B, growth 5% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.3x / 1.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$40.92	2.44x	yes	EPS $3.41, growth 9% (input: historical EPS growth), PEG=3.25 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$0.01	9998.00x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.13B × (1−7%) / WACC 7.9% → EPV (no growth) (excluded from median)
Residual Income	Asset	$56.14	1.78x	yes	BV $9.24 + 5yr PV of (ROE (TTM) 35.9% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$26.63	3.75x	yes	√(22.5 × EPS $3.41 × BVPS $9.24) — Graham's conservative floor
EV/EBITDA Relative	Relative	$70.78	1.41x	yes	EBITDA $0.30B × sector EV/EBITDA 18.0x
FCF Yield	Earnings	$0.01	9998.00x	yes	FCF $172.3M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF Yield	Earnings	$0.01	9998.00x	yes	SBC-adj FCF $0.15B (FCF $0.17B − SBC $0.03B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	$77.27	1.29x	yes	EPS $3.41 × (8.5 + 2×9.3%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$2.54	39.36x	yes	BV $9.24 × (ROIC 2.2% / WACC 7.9%) (excluded from median)
P/Sales Sector	Relative	$344.48	0.29x	yes	Revenue $3.80B × sector P/S 4.5x
PEG Fair Value	Relative	$47.41	2.11x	yes	EPS $3.41 × (PEG 1.5 × growth 9.3% (input: historical EPS growth)) → PE 13.9x
Earnings Yield	Earnings	$36.86	2.71x	yes	EPS $3.41 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$395.9m
Net debt / NOPAT (after-tax)	2.24x
Net debt / operating income (pre-tax)	2.08x
Share count CAGR (buyback)	-1.3%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• The competitive advantage here is volume through a single box, and the FY2025 10-K names what that buys: sales productivity of our restaurants provides opportunities to obtain competitive leasing terms from landlords.
• The pressure point is who walks in the door, with the same filing reporting an average check up 2.4% on an increase of 4.3% in menu pricing, partially offset by a 1.9% negative change from menu mix and customer traffic down 2.3%.
• Second-quarter results are due after the close on July 28, 2026, against a 2026 plan of up to 26 new restaurant openings.

Bull Case

The advantage this company has is not the menu, and it is not the cheesecake. It is how much revenue one location produces, and what that lets the company negotiate. The FY2025 10-K puts it in a single clause: sales productivity of our restaurants provides opportunities to obtain competitive leasing terms from landlords. A landlord filling a large anchor space wants the tenant who reliably fills it, and that tenant gets rent per dollar of sales that a smaller operator cannot match. In a business where occupancy is one of the three costs that decide whether a unit works, that is a genuine structural edge.

The returns data shows the edge in an unusual place. The trailing operating margin is about 5.5%, which is thin beside EAT at 10.4% or DRI at 11.4%. Yet return on equity ran about 35.9% over the trailing year. Both facts are true because the capital base is small relative to the sales it supports: book value per share is $9.48 against a business turning over roughly $3.80 billion of revenue. Each dollar of shareholder capital is carrying a lot of restaurant. Margin measures how much of a sale is kept; return on equity measures how hard the invested dollar works, and on the second measure this is one of the more productive operators in casual dining.

The growth is not supposed to come from the flagship, and management is clear about where it does come from. On the second concept the 10-K states that we believe there is potential for approximately 200 domestic locations over time, which supports our plan for approximately 20% average annual unit growth, and adds that Average sales per location open for the full year for North Italia restaurants were approximately $7.6 million for fiscal 2025. A second brand with proven per-location volume and a runway measured in the hundreds of units is what converts a mature chain into something that can compound. The company guided to as many as 26 openings across its concepts in 2026.

Cost discipline has been holding up underneath. The filing reports that As a percentage of revenues, food and beverage costs were 21.7% for fiscal 2025 compared to 22.5% for fiscal 2024, helped by favorable commodity inflation and sales mix. Eight tenths of a point of food cost is a large number in a business where the whole operating margin is around five and a half points.

What the market is asking for is demanding but not absurd. The quote capitalizes company-wide operating income at roughly 29 times, and embeds operating growth of about 12.1% a year over a five-year stage. That rate sits inside what the business has recently delivered, and roughly half of comparable fast-growing companies have sustained such a pace for five years. It is a coin flip on execution, not a bet on a miracle.

The balance sheet does not force the issue either way. Net of cash, funded borrowings run about 396 million dollars, roughly 1.89 times operating profit on that basis, and the company is not consuming cash. Liquid assets stand at $235.09 million. There is nothing here that requires the growth to arrive on a schedule set by a lender.

Bear Case

The advantage is eroding in the one place that matters, and the company reports it plainly. Revenue was essentially flat, and the FY2025 10-K explains why: the increase came from an average check up 2.4%, built on an increase of 4.3% in menu pricing, partially offset by a 1.9% negative change from menu mix, and offset again by decreased customer traffic of 2.3%. Read those three components together. Fewer people came. The ones who came ordered cheaper items. Revenue held only because prices went up more than either of those declines took away. A brand with real pricing power raises prices and keeps the traffic; this one raised prices and bought a flat line with them.

That matters because menu pricing is a finite resource. The filing notes the company targeted increases of roughly 2% to 3% annually before fiscal 2022 and has run above that level in the last three years to offset cost pressure. Each year of above-normal pricing makes the value proposition a little harder to defend, and the mix shift is the customer already telling you where the ceiling is.

The peer comparison offers no comfort on either axis. Operating margin here is about 5.5%. EAT runs 10.4% on $5.73 billion of revenue growing 11.8%; TXRH 8.0% on $6.06 billion growing 10.3%; DRI 11.4% on $12.76 billion growing 8.5%; CMG 15.3% on $12.14 billion. Even CAVA, a much smaller operator, converts a comparable share of revenue into operating profit while growing 24.1%. The subject grew more slowly than every name in that list, and keeps less of each sales dollar than nearly all of them. That is not what a structural advantage looks like in the numbers, whatever the leasing terms say.

Set that against what the price requires and the gap is uncomfortable. The market is capitalizing operating income at roughly 29 times and asking for about 12.1% annual operating growth over five years. The business grew revenue about 5.1% last year, and its traffic fell while it did. Nothing in the standard toolkit reaches the current quote: the nearest is the peer-multiple comparison, with the price about 17% above where those approaches land. The forward-growth methods sit further below, with the price about 44% above them, and the earnings-power methods further still. There is no valuation lens here that reaches the current level, which means the entire case rests on the unit growth arriving and the flagship not deteriorating while it does.

Capital returns will not bridge the gap either. The 10-K is candid about the purpose of the buyback: Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth. Repurchases sized to neutralize equity compensation are a treadmill rather than a return of capital, and the dividend is constrained too, with the filing noting that the ability to pay or increase it depends on the terms of the Loan Agreement as well as on operating cash flow.

Two more pressures sit behind all of it. Labor is the first, and the company flags that Labor organizing could harm our operations and competitive position in the restaurant industry as a specific risk to financial performance; in a concept built on attentive table service, wage and staffing costs are not compressible without damaging the product. The second is the lease book. Measured on funded borrowings the debt is modest, but including capitalized lease obligations the net figure is closer to 1.91 billion dollars, roughly five times the funded number. Restaurant leases are fixed for years and do not shrink when traffic does. Against that, the company holds only about 69 million dollars of equity stakes outside its operating business, about 1.7% of market value, which is not a floor worth much.

Valuation

Today's $84.78 capitalizes company-wide operating income at roughly 29 times, and the assumption behind that multiple is operating growth of about 12.1% a year sustained across a five-year stage. The company's recent record contains growth at that rate, so the question is not whether it is achievable but whether it holds. Of comparable fast-growing companies, roughly half kept such a pace going for five years.

The methods are unanimous in a way that is worth stating carefully: none of them reaches the current quote. The smallest gap is against peer multiples, where the price sits about 17% above where the peer-multiple approaches land. The gap against the cash-flow methods is wider still, the price standing about 44% above where the cash-flow methods land. The earnings-power and asset-value approaches sit lower again. When every standard lens lands underneath, the price is not being defended by a method; it is being defended by an expectation about what the business becomes.

Two of those methods are worth naming for how they get where they get. The exit-multiple cash-flow version projects six years and holds today's enterprise-to-EBITDA exit multiple flat rather than expanding it, and still lands below the quote. The excess-return approach comes closest among the book-based routes: it starts from book value of $9.48 a share, runs the 35.9% trailing return on equity above the 9.3% cost of equity for a stage, then converges the two, and finishes just under today's level. Neither is a pessimistic construction. They simply do not credit the unit growth that the price is paying for.

Which makes the concrete requirement specific. Revenue grew about 5.1% over the trailing period. Getting operating profit onto a 12.1% compound path from there has to come from new locations rather than from existing ones, because the existing ones reported traffic down 2.3% for fiscal 2025 while pricing carried the revenue line. Management's stated plan does point that way: the 10-K describes approximately 20% average annual unit growth for its second concept and Average sales per location open for the full year for North Italia restaurants were approximately $7.6 million for fiscal 2025. The arithmetic works if the openings land and the flagship holds. It does not work if the flagship keeps trading traffic for price.

The cohort frames how much room there is. EAT converts 10.4% of revenue to operating profit while growing 11.8%; TXRH 8.0% while growing 10.3%; DRI 11.4% while growing 8.5%. The subject converts 5.5%, grows more slowly than any of them, and carries a fuller multiple than several. The cost line has at least been moving the right way, with food and beverage costs running 21.7% of revenue for fiscal 2025 against 22.5% the year before. Commodity relief is not a lever management pulls, though, and it reverses.

On the balance sheet the basis matters more than the number. Measured on funded borrowings net of cash, debt is about 396 million dollars, roughly 1.89 times operating profit. Measured including capitalized lease obligations, the figure is closer to 1.91 billion dollars. For a chain that leases every location, the second number is the one that describes the actual fixed commitment, and it is close to five times the first. The company is not burning cash and holds $235.09 million of liquid assets, so nothing is urgent. What the lease book does is remove the option to shrink quietly if the traffic trend does not turn.

Catalysts

The next data point is three days out. Second-quarter fiscal 2026 results are scheduled for release after the close on July 28, 2026. The line that matters is not the revenue number but its composition: whether comparable sales are still being carried by menu pricing or whether traffic has turned. First-quarter comparable sales rose 1.6%, and the same release carried guidance for as many as 26 new restaurant openings during 2026, which is the pipeline the growth case depends on.

The sell side has spread out unusually far ahead of that print. Citi raised its target to $90 with a Buy rating in mid-July, Stephens to $80 at Equal Weight, Wells Fargo to $75 at Equal Weight, and UBS to $60 while keeping a Sell; Mizuho cut its rating to Neutral on valuation grounds. A range that wide around a single mid-cap restaurant company is itself information, and the cluster sitting below the current quote lines up with the picture in this report, where every standard valuation approach lands under today's level.

Between now and the print, the operating variables have not changed. Commodity relief helped the cost line in fiscal 2025 and is not a lever management controls; menu pricing is a lever it does control but has already used above its historical range for three years running. The July report is the first read on whether the second concept's openings are arriving fast enough to matter against those two facts.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• EAT (BRINKER INTERNATIONAL, INC.)
• FY2025 10-K: …results. The restaurant business is highly competitive as to price, service, restaurant location, convenience, and type and quality of food. We compete within each market with locally-owned restaurants as well as national and regional restaurant chains. The casual dining segment of the restaurant industry has not…
• FY2025 10-K: …on our business including consumer demand, costs, product mix, our strategic initiatives, operations, technology and assets, and our financial performance; the impact of current and potential tariffs and trade barriers; the impact of competition, including competitors employing our same strategies or discounting…
• TXRH (Texas Roadhouse, Inc.)
• FY2025 10-K: …and as a result we have identified Texas Roadhouse, Bubba's 33, and Jaggers as separate operating segments. In addition, we have identified our retail initiatives as a separate operating segment. Finally, we have identified Texas Roadhouse and Bubba's 33 as reportable segments. The Texas Roadhouse reportable segment…
• FY2025 10-K: …segments. In addition, we have identified our retail initiatives as a separate operating segment. Finally, we have identified Texas Roadhouse and Bubba's 33 as reportable segments. The Texas Roadhouse reportable segment includes the results of our company and franchise Texas Roadhouse restaurants. The Bubba's 33…
• DRI (DARDEN RESTAURANTS, INC.)
• FY2025 10-K: …share). SEGMENT RESULTS We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Chuy's, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Eddie V's, Bahama Breeze and The Capital Burger in the U.S. and Canada as operating segments. We aggregate our operating segments…
• FY2025 10-K: …(CODM). Our CODM uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). Non-cash lease-related expenses from our operating segments…
• CMG (CHIPOTLE MEXICAN GRILL, INC.)
• FY2025 10-K: …we believe will drive our financial results and long-term growth model. W e believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies: • Comparable restaurant sales • Food, beverage, and…
• FY2025 10-K: …operating segment is comprised of all 11 operating segments located in the United States, which we have aggregated to a single operating segment in consideration of the aggregation criteria set forth in ASC 280. All other operating segments, which comprise our operations in Canada, Europe and international…
• CAVA (CAVA Group, Inc.)
• FY2025 10-K: …personnel, particularly in new restaurant locations. In addition, we must maintain our culture as our operations expand and as we onboard new Team Members, as we believe our culture is a key competitive advantage and an important contributor to our success. Our business, financial condition, and results of operations…
• FY2025 10-K: …into contracts with new third parties, and we may face more competitive labor conditions or costs in a new market. Until we attain a critical mass in a market, the restaurants we open in that market may incur higher food distribution costs and reduced operating leverage. As a result, restaurants we open in new…
• SHAK (SHAKE SHACK INC.)
• FY2025 10-K: …and new companies that compete directly and indirectly with us with respect to taste, menu, price, food quality, service, value, design, and location. We compete in the restaurant industry with multi-unit national, regional and locally-owned and/or operated limited-service restaurants, and full-service restaurants.…
• FY2025 10-K: …as our competitors. We also face increasing competitive pressures from some of our competitors who have announced initiatives to offer better quality ingredients. Changes in consumer tastes, nutritional and dietary trends, traffic patterns and the type, number, and location of competing restaurants often affect the…
• WING (WINGSTOP INC.)
• FY2025 10-K: …margins we expect, we may experience a delay in or loss of royalty income, our results of operations and growth may be negatively impacted, and our common stock price may decline. The loss of key employees or difficulties recruiting and retaining qualified employees or effectively managing changes in our workforce…
• FY2025 10-K: …in general, and the fast casual category in particular, are intensely competitive, and we compete with many well-established restaurant companies on the basis of food taste and quality, price, service, value, location, convenience, digital engagement, delivery and overall customer experience. Our competitors include…
• YUMC (Yum China Holdings, Inc.)
• FY2025 10-K: …to our business. Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights. 16 2025 Form 10-K Competition Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China…
• FY2025 10-K: …which we operate is highly competitive. The restaurant industry in which we operate is highly competitive with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

company earnings calendar, July 2026 · first-quarter results, April 29, 2026 · analyst notes reported July 2026