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Cheesecake Factory Appears Overvalued

When shares in Cheesecake Factory (CAKE) dropped to $42.90 in August last year, I recommended buying. You can find this article here. It's now six months later and shares are trading at a price of $52.91, an increase of 23.3%. The dividend yield has dropped back down to 1.25%.

CAKE PE Ratio ((TTM) data by YCharts

Earnings per share in the most recent 12 months were $2.10, putting the price to earnings ratio at 25.0. This is quite a bit higher than the five-year average of 22.5. EPS is expected to reach $2.43 next year, putting the forward P/E ratio at 21.9. However, it should be noted CAKE has missed analyst expectations in each of the past four quarters.

CAKE PS Ratio ((TTM) data by YCharts

CAKE's revenue has grown by an average of 3.17% annually over the past five years. The price per share has gone up considerably… Read More …