Choice Hotels International (NYSE:CHH) vs. Cheesecake Factory (NASDAQ:CAKE) Financial Survey

Cheesecake Factory (NASDAQ:CAKE) and Choice Hotels International (NYSE:CHH) are both mid-cap consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, profitability, risk, institutional ownership and analyst recommendations.

Risk & Volatility

Cheesecake Factory has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.Comparatively, Choice Hotels International has a beta of 0.67, suggesting that its share price is 33% less volatile than the S&P 500.

Institutional and Insider Ownership

94.5% of Cheesecake Factory shares are owned by institutional investors. Comparatively, 65.6% of Choice Hotels International shares are owned by institutional investors. 8.0% of Cheesecake Factory shares are owned by insiders. Comparatively, 23.9% of Choice Hotels International shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Cheesecake Factory pays an annual dividend of $1.20 per share and has a dividend yield of 1.1%. Choice Hotels International pays an annual dividend of $1.15 per share and has a dividend yield of 1.1%. Cheesecake Factory pays out 32.5% of its earnings in the form of a dividend. Choice Hotels International pays out 16.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Choice Hotels International is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings and price targets for Cheesecake Factory and Choice Hotels International, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cheesecake Factory	2	10	5	1	2.28
Choice Hotels International	4	8	2	0	1.86

Cheesecake Factory presently has a consensus target price of $81.00, indicating a potential downside of 28.56%. Choice Hotels International has a consensus target price of $112.33, indicating a potential upside of 7.71%. Given Choice Hotels International’s higher probable upside, analysts clearly believe Choice Hotels International is more favorable than Cheesecake Factory.

Profitability

This table compares Cheesecake Factory and Choice Hotels International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cheesecake Factory	4.61%	43.97%	6.18%
Choice Hotels International	20.28%	205.69%	10.68%

Valuation and Earnings

This table compares Cheesecake Factory and Choice Hotels International”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cheesecake Factory	$3.75 billion	1.50	$148.43 million	$3.69	30.73
Choice Hotels International	$1.62 billion	2.90	$369.95 million	$7.08	14.73

Choice Hotels International has lower revenue, but higher earnings than Cheesecake Factory. Choice Hotels International 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

Choice Hotels International beats Cheesecake Factory on 10 of the 17 factors compared between the two stocks.

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.

About Choice Hotels International

Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor in the United States and internationally. It operates through Hotel Franchising & Management and Corporate & Other segments. The company franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Clarion Pointe, Sleep Inn, Ascend Hotel Collection, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Studios, WoodSpring Suites, Everhome Suites, Cambria Hotels, Radisson Blu, Radisson RED, Radisson, Park Plaza, Country Inn & Suites by Radisson, Radisson Inn & Suites, Park Inn by Radisson, Radisson Individuals, and Radisson Collection. Choice Hotels International, Inc. was founded in 1939 and is headquartered in North Bethesda, Maryland.