We recently compiled a list of the 9 Best Pizza Stocks to Buy Now. In this article, we are going to take a look at where The Cheesecake Factory Incorporated (NYSE:CAKE) stands against the other pizza stocks.
How’s the Pizza Market Doing?
Originating from Italy hundreds of years ago, and spreading across the globe like wildfire ever since, pizza has always been the consumers’ go-to food option, and hence, its market is growing to date. As such, as reported in one of our articles on best pizza stocks to buy, the pizza market is set to experience a CAGR of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion by 2032. Similarly, the frozen pizza segment is also expected to increase during the period 2023-2028, gathering a market size of $5.96 billion during the period, showcasing a CAGR of 4.96%.
The popularity of pizza can be judged from the statistics showing that there are 245,000 pizza restaurants in the world, and around 77,000 restaurants within the U.S. The U.S. itself experienced record-high pizza sales of $46.9 billion in 2022, thanks to over 7,000 units opening up in the eight years up till 2022. This reinforces the fact that the largest pizza chains in the world are based in the U.S. Pizza Hut, one of the biggest pizza brands in the world, is the oldest one, which was founded back in 1958 in Kansas, USA.
What’s Cooking in the Industry?
Within the frozen pizza segment, meat toppings dominate the market as it has a share of 56% in sales, while vegetable toppings have a share of 26%. In contrast, cheese toppings are also competing nicely, as it has a 14% share, as reported by media.market.us. DiGiorno, Red Baron, and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand awareness.
The recent trends in the pizza market include rising demand for vegan pizzas (frozen or otherwise); this evolving market of pizza has got is on a roll, as new demands keep popping up for cheese substitutes, all sorts of pepperoni, Mexican style meats like Birria and chorizo, and new topping varieties
What’s new in the industry is the rapid acceleration of technology use in the context of operators, as a survey shows that 748 pizza makers in the U.S. find online ordering the new go-to way of consuming pizzas and that 78.21% of the producers are investing in a great deal to up their brand presence across the internet. The optimism is on the high side as well amongst the pizza makers as most believe in sales growth in the next twelve months.
Thus, certainly, the pizza market is one to grow indefinitely (or at least it should), and hence, to capitalize on this growth, one must know the best pizza stock to buy. So, let’s move on to our list of 9 Best Pizza Stocks to Buy Now.
Methodology
To curate our list of 9 Best Pizza Stocks to Buy Now, we gathered a list of all companies with a significant presence in the pizza industry and related industries of cheese and flour. We then further narrowed them down on the basis of various metrics like institutional ownership, the number of analysts watching the stock, and the overall financial health of respective stocks. We ranked the finest remaining companies by the number of hedge funds that had stake in them as of Q2, 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A baker in a busy bakery, arranging freshly baked treats on a tray.
The Cheesecake Factory Incorporated (NYSE:CAKE)
Number of Hedge Fund Holders: 22
Upside Potential: 12.90%
Next we have The Cheesecake Factory Incorporated (NYSE:CAKE), which although known for its cheesecakes, also makes flatbread pizzas. The company is based in the U.S. and owns over 340 restaurants across the U.S. and Canada.
The Cheesecake Factory Incorporated (NYSE:CAKE) demonstrated a robust performance in the 2nd quarter of 2024, surpassing expectations. The revenue climbed to the higher end of the projected range, hitting $904 million. In addition to this, the operational efficiency of the company in the quarter enabled it to record a 24% YoY growth in its adjusted earnings per share.
The comparable sales experienced an uptick of 1.4%, which was better than the overall casual dining sector, achieving record-high average weekly sales on the way as well. On top of that, the Cheesecake Factory recently opened a restaurant in Utah, which experienced a great deal of demand. The robust performance of the company in the quarter was also marked by efficient cost management and higher labor productivity that led to its 17.7% 4-wall margin, which was the highest in six years.
This performance is set to continue in the coming quarters, as the company expects 22 new units to be opened in 2024, with 11 having already opened so far, with one unit getting successfully launched in Asia, signifying the growing market expansion of the brand.
Going forward, the analysts are seeing a revenue figure of $3.58 billion in 2024, which would be a 2.3% YoY growth. On the other hand, EPS is also expected to be higher than 2023 levels in the coming two quarters, amounting to $0.5 per share and $0.9 per share in the third and fourth quarters, respectively. The debt position of the company, which is consistently hovering around $470 million, could be a factor that investors could dig into, however, the liquidity of the company seems to be alright considering that it has a free cash flow of $277 million, additional cash balance of $41 million, and $237 million on the revolving credit facility.
Nonetheless, 15 analysts are seeing a 12.9% upside of the stock, supported by 22 hedge fund holders being bullish on the stock, as of Q2 2024.
Overall CAKE ranks 7th on our list of the best pizza stocks to buy. While we acknowledge the potential of CAKE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CAKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.