Analyzing Cheesecake Factory (NASDAQ:CAKE) and Rave Restaurant Group (NASDAQ:RAVE)

Rave Restaurant Group (NASDAQ:RAVE) and Cheesecake Factory (NASDAQ:CAKE) are both retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Profitability

This table compares Rave Restaurant Group and Cheesecake Factory’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rave Restaurant Group	23.19%	19.22%	16.81%
Cheesecake Factory	4.34%	43.74%	5.81%

Insider & Institutional Ownership

15.1% of Rave Restaurant Group shares are held by institutional investors. Comparatively, 94.5% of Cheesecake Factory shares are held by institutional investors. 28.0% of Rave Restaurant Group shares are held by company insiders. Comparatively, 8.0% of Cheesecake Factory shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Rave Restaurant Group has a beta of 0.41, meaning that its stock price is 59% less volatile than the S&P 500. Comparatively, Cheesecake Factory has a beta of 1.01, meaning that its stock price is 1% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings for Rave Restaurant Group and Cheesecake Factory, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rave Restaurant Group	0	1	0	0	2.00
Cheesecake Factory	3	9	6	0	2.17

Cheesecake Factory has a consensus target price of $66.25, indicating a potential downside of 18.93%. Given Cheesecake Factory’s stronger consensus rating and higher possible upside, analysts plainly believe Cheesecake Factory is more favorable than Rave Restaurant Group.

Earnings and Valuation

This table compares Rave Restaurant Group and Cheesecake Factory”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rave Restaurant Group	$12.04 million	3.89	$2.70 million	$0.21	15.71
Cheesecake Factory	$3.75 billion	1.08	$148.43 million	$3.42	23.89

Cheesecake Factory has higher revenue and earnings than Rave Restaurant Group. Rave Restaurant Group is trading at a lower price-to-earnings ratio than Cheesecake Factory, indicating that it is currently the more affordable of the two stocks.

Summary

Cheesecake Factory beats Rave Restaurant Group on 10 of the 14 factors compared between the two stocks.

About Rave Restaurant Group

Rave Restaurant Group, Inc., together with its subsidiaries, engages in the operation and franchising of pizza buffet, delivery/carry-out (delco), and express restaurants under the Pizza Inn and Pie Five trademarks in the United States and internationally. The company operates through three segments: Pizza Inn Franchising, Pie Five Franchising, and Company-Owned Restaurants. Its buffet restaurants are located in free standing buildings or strip centers in retail developments that offer dine-in, carryout, and catering services, as well as delivery services. The company’s delco restaurants provide delivery and carryout services and are located in shopping centers or other in-line retail developments. Its Express restaurants serve customers through various non-traditional points of sale and are located in convenience stores, food courts, college campuses, airport terminals, travel plazas, athletic facilities, or other commercial facilities. The company’s Pizza Inn Express restaurants serve customers through a non-traditional, licensed, pizza-only model called Pizza Inn Express, located at production-oriented facilities. In addition, it operates and franchises fast casual restaurants under the Pie Five Pizza Company or Pie Five trademarks. The company was formerly known as Pizza Inn Holdings, Inc. and changed its name to Rave Restaurant Group, Inc. in January 2015. Rave Restaurant Group, Inc. was founded in 1958 and is based in The Colony, Texas.

About Cheesecake Factory

The Cheesecake Factory Incorporated operates and licenses restaurants in the United States and Canada. The company operates bakeries that produce cheesecakes and other baked products for its restaurants, international licensees, third-party bakery customers, external foodservice operators, retailers, and distributors. It operates restaurants under the brands comprising The Cheesecake Factory, North Italia, Flower Child, Fox Restaurant Concepts. The Cheesecake Factory Incorporated was founded in 1972 and is headquartered in Calabasas, California.