Essay on Financial Analysis of the Cheesecake Factory

2692 Words Sep 21st, 2005 11 Pages
Table of Contents
Introduction…………………………………………………………….3
Section 1……..………………………………………………………….3
Section 2- Ratio Analysis……...……………………………………8
Table 1- Ratio Analysis for 3 restaurants…...……………………………..8
Section 3- Vertical Analysis……………………………………………9
Table 2- Vertical/Common Size Analysis…...………………………………9
Section 4- Major Elements of Cash Flow…………………………….10
Table 3- Cash Flow Comparison for 3 restaurants…...…………………..10 Figure 1- Comparison of Net Income …...…………………………………11 Figure 2- Comparison of Net Cash Flow from Operating Activities….….11 Figure 3- Comparison of Net Cash Flow from Investing Activities………12
Figure 4- Comparison of Net Cash Flow from Financing Activities……...12
Figure 5- Comparison of Net Change in
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For every dollar of sales generated by CF, 7.4% is returned to CF as income. That number is not considered large for most industries, but for the restaurant industry it's significant. PF Changs ranks second with a profit margin of 4.5%, and CPK third with a Profit Margin of 2.2%. PF Changs is more effective than CPK and Cheesecake Factory in using its assets to generate sales as is demonstrated by a higher Asset Turnover ratio. However, Cheesecake Factory, with a return on assets of 11%, is able to generate more net income for every dollar it puts into assets than CPK or PF Changs. Cheesecake Factory also reports the highest Return on Equity and Earnings Per Share of the three restaurants but PF Changs is close behind. Investors can expect a return of 13.8% on each dollar they invest in Cheesecake Factory. For each dollar invested in PF Changs, a 10.2% return can be expected, and for every dollar invested in CPK a 4.5% return can be expected. A Return on Equity above 10% is impressive for the restaurant industry. Earnings per share for Cheesecake Factory are $1.16, that is also competitive in the restaurant industry. PF Changs is close behind with an EPS of $.98 and CPK lacks a bit in this category with an EPS of $.42. CPK's market price was 53 times greater than its earnings for 2003, while PF Chang's market price was almost 49 times its earnings and Cheesecake Factory's market price was 34 times its earnings. Both P.F. Chang's and CPK's P/E

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