We recently published a list of The 9 Best Pizza Stocks to Buy Now. In this article, we take a look at how The Cheesecake Factory Incorporated (NYSE:CAKE) compares to other pizza stocks.
How is the pizza market doing?
Pizza originated in Italy and has since spread like wildfire across the globe. It has always been the first choice of consumers and hence its market is growing till date. As reported in one of our articles on the best pizza stocks to buy, the pizza market is expected to register a compound annual growth rate (CAGR) of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion in 2032. The frozen pizza segment is also expected to grow during the period 2023-2028, reaching a market value of $5.96 billion, registering a compound annual growth rate (CAGR) of 4.96%.
The popularity of pizza can be gauged by statistics showing that there are 245,000 pizzerias worldwide, with about 77,000 of them in the US. The US itself recorded record pizza sales of $46.9 billion in 2022, thanks to the opening of over 7,000 outlets in the eight years to 2022. This underlines the fact that the largest pizza chains in the world are based in the US. Pizza Hut, one of the largest pizza brands in the world, is the oldest, having been founded in Kansas, USA, back in 1958.
What’s going on in the industry?
In the frozen pizza segment, meat toppings dominate the market with a 56% share of sales, while vegetable toppings have a 26% share. In contrast, cheese toppings also compete well with a 14% share, it is reported media.Market.us. DiGiorno, Red Baron and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand recognition.
Recent trends in the pizza market include the increasing demand for vegan pizzas (frozen or otherwise); this evolving pizza market is in full swing as new demands for cheese substitutes, all kinds of pepperoni, Mexican meats like birria and chorizo, and new toppings continue to emerge.
What is new in the industry is the rapidly increasing use of technology by operators. A survey shows that 748 pizza makers in the US consider online ordering to be the new preferred way of consuming pizza and that 78.21% of manufacturers are investing heavily to strengthen their brand presence online. Optimism is also high among pizza makers, as most of them believe that sales will grow over the next twelve months.
So, the pizza market will undoubtedly grow indefinitely (or at least it should), and to capitalize on that growth, you need to know which pizza stocks are the best to buy. So let’s get to our list of the 9 best pizza stocks to buy now.
methodology
To compile our list of the 9 best pizza stocks to buy now, we compiled a list of all the companies that have a significant presence in the pizza industry and the related cheese and flour industries. Then, we further narrowed it down based on various metrics such as institutional ownership, the number of analysts covering the stock, and the overall financial health of each stock. We ranked the top remaining companies by the number of hedge funds that had stakes in them as of December 31, 2018. 2nd quarter 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A baker in a busy bakery arranges freshly baked treats on a tray.
The Cheesecake Factory Incorporated (NYSE:CAKE)
Number of hedge fund owners: 22
Upside potential: 12.90%
Next, we have The Cheesecake Factory Incorporated (NYSE:CAKE), which is known for its cheesecakes but also makes flatbread pizza. The company is based in the United States and owns over 340 restaurants in the United States and Canada.
The Cheesecake Factory Incorporated (NYSE:CAKE) showed a robust performance in the 2and Q3 2024, beating expectations. Revenue climbed to the high end of the forecast range, reaching $904 million. In addition, the company’s operational efficiencies enabled adjusted earnings per share to grow 24% year over year in the quarter.
Comparable sales saw a 1.4% increase, which was better than the overall casual dining sector, which also posted record average weekly sales. In addition, the Cheesecake Factory recently opened a restaurant in Utah, which saw strong demand. The company’s robust performance in the quarter was also marked by efficient cost management and higher labor productivity, which resulted in a 4-wall margin of 17.7%, the highest in six years.
This performance is expected to continue in the coming quarters, as the company expects to open 22 new units in 2024. Eleven have already been opened so far, with one unit successfully launched in Asia, signaling the brand’s growing market expansion.
For 2024, analysts expect revenues of $3.58 billion, representing year-over-year growth of 2.3%. On the other hand, earnings per share are expected to be above 2023 levels in the next two quarters, coming in at $0.5 per share and $0.9 per share in the third and fourth quarters, respectively. The company’s debt position, which is consistently around $470 million, could be a factor that investors should consider. However, the company’s liquidity seems to be fine considering that it has free cash flow of $277 million, additional cash on hand of $41 million, and $237 million on the revolving credit facility.
Nevertheless, 15 analysts forecast an upside potential of 12.9% for the stock starting in the second quarter of 2024, supported by the assessment of 22 hedge fund holders.
Overall impression CAKE 7th place on our list of the best pizza stocks to buy. While we recognize CAKE’s potential as an investment, we believe some highly undervalued AI stocks promise higher returns, and in a shorter time frame. If you’re looking for a highly undervalued AI stock that’s more promising than CAKE but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
