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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is The Cheesecake Factory (CAKE). CAKE is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 13.44. This compares to its industry's average Forward P/E of 23.54. CAKE's Forward P/E has been as high as 17.61 and as low as 11.03, with a median of 13.74, all within the past year.
CAKE is also sporting a PEG ratio of 1.21. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CAKE's industry currently sports an average PEG of 1.97. Over the past 52 weeks, CAKE's PEG has been as high as 1.64 and as low as 1.02, with a median of 1.27.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CAKE has a P/S ratio of 0.74. This compares to its industry's average P/S of 0.79.
Finally, we should also recognize that CAKE has a P/CF ratio of 9.96. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 21.60. CAKE's P/CF has been as high as 12.50 and as low as 8.33, with a median of 10.22, all within the past year.
These are only a few of the key metrics included in The Cheesecake Factory's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CAKE looks like an impressive value stock at the moment.
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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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