The Cheesecake Factory (CAKE): Buy, Sell, or Hold Post Q2 Earnings?

September 15, 2025 at 00:04 AM EDT

CAKE Cover Image

The Cheesecake Factory trades at $56.90 per share and has stayed right on track with the overall market, gaining 20.4% over the last six months. At the same time, the S&P 500 has returned 15.9%.

Is now the time to buy The Cheesecake Factory, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is The Cheesecake Factory Not Exciting?

We're sitting this one out for now. Here are three reasons you should be careful with CAKE and a stock we'd rather own.

1. Same-Store Sales Falling Behind Peers

Same-store sales is a key performance indicator used to measure organic growth at restaurants open for at least a year.

The Cheesecake Factory’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.5% per year.

The Cheesecake Factory Same-Store Sales Growth

2. Weak Operating Margin Could Cause Trouble

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

The Cheesecake Factory was profitable over the last two years but held back by its large cost base. Its average operating margin of 4.5% was weak for a restaurant business. This result is surprising given its high gross margin as a starting point.

The Cheesecake Factory Trailing 12-Month Operating Margin (GAAP)

3. High Debt Levels Increase Risk

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

The Cheesecake Factory’s $2.10 billion of debt exceeds the $148.8 million of cash on its balance sheet. Furthermore, its 6× net-debt-to-EBITDA ratio (based on its EBITDA of $316.3 million over the last 12 months) shows the company is overleveraged.

The Cheesecake Factory Net Debt Position

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. The Cheesecake Factory could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope The Cheesecake Factory can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

Final Judgment

The Cheesecake Factory isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 14.4× forward P/E (or $56.90 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of The Cheesecake Factory

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