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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Cheesecake Factory (NASDAQ:CAKE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cheesecake Factory with the means to add long-term value to shareholders.
View our latest analysis for Cheesecake Factory
Cheesecake Factory's Improving Profits
In the last three years Cheesecake Factory's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Cheesecake Factory's EPS shot up from US$1.75 to US$2.51; a result that's bound to keep shareholders happy. That's a commendable gain of 44%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Cheesecake Factory maintained stable EBIT margins over the last year, all while growing revenue 2.4% to US$3.5b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Cheesecake Factory's future profits.
Are Cheesecake Factory Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Cheesecake Factory insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$177m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.