Icing On The Cake: Cheesecake Factory Is A 'Best-In-Class' Operator, Says Canaccord

Canaccord Genuity initiated coverage on Cheesecake Factory Inc (NASDAQ: CAKE) with a Hold rating citing balanced risk and reward. However, analysts Lynne Collier and Philip May termed the restaurant a "Best-in-Class" operator.

The brokerage, which has a price target of $54 on the company's shares, was impressed by the consistent performance of the company and the market share gains under a tough market scenario. Incidentally, the company's EPS topped the Street's estimates by 3.8 percent to 11.5 percent in the last four quarters.

The lead analyst picked up two underappreciated factors from Cheesecake Factory. The first one is the opportunity available at the international level, and the second is the strict discipline adopted by the management in relation to its ROIC metrics.

Canaccord said in the research note, "While there is much to like about CAKE, at the current share price of ~$52 we do not see sufficient upside potential in the shares to warrant a Buy rating. At present, shares are trading at 15.1x and 8.9x our 2017 EPS and EBITDA estimates, respectively, which is just above their 5-year average multiple."

The brokerage said that its target objective of $54, which indicated 4 percent upside potentials, was based on its ~9x its 2017 EBITDA estimate of $294 million.

The stock closed Monday's regular trading at $52.10 and was up roughly half a percent at time of writing Tuesday.

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