Financial Comparison: Sonic Drive-In (SONC) vs. Cheesecake Factory (CAKE)

Cheesecake Factory (NASDAQ: CAKE) and Sonic Drive-In (NASDAQ:SONC) are both retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, valuation and risk.

Dividends

Cheesecake Factory pays an annual dividend of $1.16 per share and has a dividend yield of 2.1%. Sonic Drive-In pays an annual dividend of $0.64 per share and has a dividend yield of 1.9%. Cheesecake Factory pays out 44.6% of its earnings in the form of a dividend. Sonic Drive-In pays out 51.2% 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. Cheesecake Factory is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

97.6% of Cheesecake Factory shares are held by institutional investors. 8.8% of Cheesecake Factory shares are held by insiders. Comparatively, 8.3% of Sonic Drive-In shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Cheesecake Factory and Sonic Drive-In’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cheesecake Factory 6.49% 19.01% 8.90%
Sonic Drive-In 16.01% -25.75% 9.94%

Analyst Ratings

This is a breakdown of recent ratings and price targets for Cheesecake Factory and Sonic Drive-In, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cheesecake Factory 1 14 3 0 2.11
Sonic Drive-In 1 8 5 0 2.29

Cheesecake Factory presently has a consensus target price of $49.78, indicating a potential downside of 9.26%. Sonic Drive-In has a consensus target price of $28.50, indicating a potential downside of 14.82%. Given Cheesecake Factory’s higher probable upside, equities analysts plainly believe Cheesecake Factory is more favorable than Sonic Drive-In.

Volatility & Risk

Cheesecake Factory has a beta of 0.27, meaning that its share price is 73% less volatile than the S&P 500. Comparatively, Sonic Drive-In has a beta of 1.45, meaning that its share price is 45% more volatile than the S&P 500.

Earnings & Valuation

This table compares Cheesecake Factory and Sonic Drive-In’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cheesecake Factory $2.26 billion 1.11 $157.39 million $2.60 21.10
Sonic Drive-In $477.27 million 2.60 $63.66 million $1.25 26.77

Cheesecake Factory has higher revenue and earnings than Sonic Drive-In. Cheesecake Factory is trading at a lower price-to-earnings ratio than Sonic Drive-In, indicating that it is currently the more affordable of the two stocks.

Summary

Cheesecake Factory beats Sonic Drive-In on 9 of the 16 factors compared between the two stocks.

About Cheesecake Factory

The Cheesecake Factory Incorporated operates restaurants in the United States. 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 February 28, 2018, it operated 214 company-owned restaurants, including 199 restaurants under The Cheesecake Factory brand; 13 restaurants under the Grand Lux Cafe brand; and 2 restaurants under the RockSugar Southeast Asian Kitchen brand, as well as 20 The Cheesecake Factory branded restaurants under licensing agreements internationally. The company was founded in 1972 and is headquartered in Calabasas, California.

About Sonic Drive-In

Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in the United States. As of August 31, 2017, the company operated 3,593 Sonic Drive-Ins in 45 states, of which 228 were owned and operated by the company and 3,365 were owned and operated by franchisees. The company also owns and leases 135 properties; and sublease 53 properties to franchisees and other parties. The company was founded in 1953 and is headquartered in Oklahoma City, Oklahoma.

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