Cheesecake Factory (NASDAQ:CAKE) and Meritage Hospitality Group (OTCMKTS:MHGU) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, risk, earnings, dividends, valuation, analyst recommendations and institutional ownership.
Institutional and Insider Ownership
99.4% of Cheesecake Factory shares are held by institutional investors. 8.5% of Cheesecake Factory shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
This is a summary of recent recommendations and price targets for Cheesecake Factory and Meritage Hospitality Group, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Cheesecake Factory | 1 | 9 | 2 | 0 | 2.08 |
| Meritage Hospitality Group | 0 | 0 | 0 | 0 | N/A |
Cheesecake Factory presently has a consensus target price of $47.25, suggesting a potential upside of 8.35%. Given Cheesecake Factory’s higher possible upside, research analysts clearly believe Cheesecake Factory is more favorable than Meritage Hospitality Group.
Dividends
Cheesecake Factory pays an annual dividend of $1.44 per share and has a dividend yield of 3.3%. Meritage Hospitality Group does not pay a dividend. Cheesecake Factory pays out 59.3% of its earnings in the form of a dividend.
Earnings & Valuation
This table compares Cheesecake Factory and Meritage Hospitality Group’s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Cheesecake Factory | $2.33 billion | 0.83 | $99.04 million | $2.43 | 17.95 |
| Meritage Hospitality Group | $435.30 million | 0.27 | $13.01 million | N/A | N/A |
Cheesecake Factory has higher revenue and earnings than Meritage Hospitality Group.
Risk & Volatility
Cheesecake Factory has a beta of 0.45, meaning that its share price is 55% less volatile than the S&P 500. Comparatively, Meritage Hospitality Group has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500.
Profitability
This table compares Cheesecake Factory and Meritage Hospitality Group’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Cheesecake Factory | 3.99% | 21.61% | 6.03% |
| Meritage Hospitality Group | 2.64% | 17.53% | 2.35% |
Summary
Cheesecake Factory beats Meritage Hospitality Group on 12 of the 13 factors compared between the two stocks.
About Cheesecake Factory
The Cheesecake Factory Incorporated engages in the operation of restaurants. The company produces cheesecakes and other baked products for own restaurants and international licensees, as well as external foodservice operators, retailers, and distributors. As of April 16, 2019, it owned and operated 219 full-service casual-dining restaurants in the United States, including Puerto Rico and Canada comprising 202 restaurants under The Cheesecake Factory name; 14 restaurants under the Grand Lux Café name; and 2 restaurants under the RockSugar Southeast Asian Kitchen name, as well as 22 The Cheesecake Factory restaurants under licensing agreements internationally. The company was founded in 1972 and is headquartered in Calabasas, California.
About Meritage Hospitality Group
Meritage Hospitality Group Inc. operates quick-service and casual dining restaurants. The company operates restaurants under the Wendy's, Twisted Rooster, Crooked Goose, Freighters Eatery & Taproom, and Wheelhouse Kitchen & Cocktails brand names. As of November 13, 2018, it operated 314 restaurants in Arkansas, Connecticut, Florida, Georgia, Indiana, Massachusetts, Michigan, Missouri, Mississippi, North Carolina, South Carolina, Ohio, Oklahoma, Tennessee, Texas, and Virginia. The company was formerly known as Thomas Edison Inns, Inc. and changed its name to Meritage Hospitality Group Inc. in May 1996. Meritage Hospitality Group Inc. was incorporated in 1986 and is headquartered in Grand Rapids, Michigan.
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