The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is The Cheesecake Factory (CAKE). CAKE is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 13.95. This compares to its industry's average Forward P/E of 23.77. Over the past year, CAKE's Forward P/E has been as high as 17.61 and as low as 10.50, with a median of 13.74.
We also note that CAKE holds a PEG ratio of 1.25. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CAKE's PEG compares to its industry's average PEG of 1.99. Within the past year, CAKE's PEG has been as high as 1.64 and as low as 0.97, with a median of 1.27.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CAKE has a P/S ratio of 0.76. This compares to its industry's average P/S of 0.78.
Finally, our model also underscores that CAKE has a P/CF ratio of 10.32. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 21.83. Within the past 12 months, CAKE's P/CF has been as high as 12.50 and as low as 8.31, with a median of 10.22.
Value investors will likely look at more than just these metrics, but the above data helps show that The Cheesecake Factory is likely undervalued currently. And when considering the strength of its earnings outlook, CAKE sticks out as one of the market's strongest value stocks.
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The Cheesecake Factory Incorporated (CAKE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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