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No. of Recommendations: 8
I think The Cheesecake Factory is one of the better-run businesses in the restaurant space. It also looks to be shareholder focused, returning a large part of profits back to investors.

The company has a history of buybacks, seemingly regardless of stock price and valuation. Whether buybacks are always considered returning profits to investors is debatable; there's a good case to be made that buybacks only benefit shareholders when shares are bought below intrinsic value. Intrinsic value is hard to pinpoint and most managements usually think their shares undervalued whatever the price. However, constant buybacks over time usually benefits shareholders of good profitable companies.

The company pays a dividend which yields about 2.6%. Certainly returning profits to shareholders, though at present stock prices, the yield, in and of itself, isn't especially enticing.

Capital expenditure is such that presently all free cash-flow is going to share repurchases and the dividend. Over the last several years the proportion of capital expenditures to income has been expanding, this is not a trend you really want to see continue. Financials are generally good though; the company has little debt.

The company is in a slump and is being punished for it. It's hard to know if this is a good buy-in price, but it's worth mentioning the company's historical P/E is at its lows. For at least the last 15 years CAKE's P/E was always above the market median, now it's below. Value Line posits that "More conservative investors will likely want to wait for comps to recover and take more of a wait and see approach." Short of a significantly lower stock price, this is probably good advice.

I agree: worth keeping an eye on.

kelbon
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