6 Months After a Transformational Acquisition, Is Cheesecake Factory a Buy?
Back in July 2019, The Cheesecake Factory (NASDAQ: CAKE) decided to acquire Fox Restaurant Concepts, snapping up its smorgasbord of casual and casually upscale dining brands, along with separate brand North Italia. The Cheesecake Factory greatly diversified the styles and cuisines on its corporate menu with the acquisitions, appealing to everyone from vegans to paleo aficionados and people hungering for ethnic cuisine. With its many new restaurants, the company aims to whip up a feast of profitable growth going forward -- provided it can reach its unit growth targets.
While not showing skyrocketing growth, The Cheesecake Factory's position when it closed the acquisitions mark it as a well-run business. Investors enjoy a 3.7% dividend yield, and the company has consistently achieved a strong return on invested capital -- between 12% and 17% annually -- since 2010. To maintain the dividend, The Cheesecake Factory repurchases approximately 3% of weighted average outstanding shares annually.
The Cheesecake Factory dished out cash amounting to approximately $308 million at closing to acquire Fox and $130 million in cash for North Italia, with around $45 million more due over the next four years. The deals raise The Cheesecake Factory's total number of restaurants to 292 in North America and 26 overseas.
Source Fool.com
