Choice Hotels International (NYSE:CHH – Get Free Report) and Cheesecake Factory (NASDAQ:CAKE – Get Free Report) are both mid-cap consumer discretionary companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, profitability, earnings, dividends, valuation, analyst recommendations and institutional ownership.
Earnings and Valuation
This table compares Choice Hotels International and Cheesecake Factory”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Choice Hotels International | $1.60 billion | 2.89 | $369.95 million | $7.08 | 14.47 |
| Cheesecake Factory | $3.75 billion | 1.47 | $148.43 million | $3.69 | 30.13 |
Dividends
Choice Hotels International pays an annual dividend of $1.15 per share and has a dividend yield of 1.1%. Cheesecake Factory pays an annual dividend of $1.20 per share and has a dividend yield of 1.1%. Choice Hotels International pays out 16.2% of its earnings in the form of a dividend. Cheesecake Factory pays out 32.5% 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. Choice Hotels International is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a breakdown of recent recommendations and price targets for Choice Hotels International and Cheesecake Factory, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Choice Hotels International | 4 | 8 | 2 | 0 | 1.86 |
| Cheesecake Factory | 2 | 10 | 5 | 1 | 2.28 |
Choice Hotels International presently has a consensus target price of $111.92, indicating a potential upside of 9.24%. Cheesecake Factory has a consensus target price of $81.00, indicating a potential downside of 27.15%. Given Choice Hotels International’s higher possible upside, equities research analysts clearly believe Choice Hotels International is more favorable than Cheesecake Factory.
Volatility & Risk
Choice Hotels International has a beta of 0.67, meaning that its stock price is 33% less volatile than the S&P 500. Comparatively, Cheesecake Factory has a beta of 1, meaning that its stock price has a similar volatility profile to the S&P 500.
Profitability
This table compares Choice Hotels International and Cheesecake Factory’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Choice Hotels International | 20.28% | 205.69% | 10.68% |
| Cheesecake Factory | 4.61% | 43.97% | 6.18% |
Institutional and Insider Ownership
65.6% of Choice Hotels International shares are held by institutional investors. Comparatively, 94.5% of Cheesecake Factory shares are held by institutional investors. 23.9% of Choice Hotels International shares are held by insiders. Comparatively, 8.0% of Cheesecake Factory shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Summary
Choice Hotels International beats Cheesecake Factory on 10 of the 17 factors compared between the two stocks.
About Choice Hotels International
Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor in the United States and internationally. It operates through Hotel Franchising & Management and Corporate & Other segments. The company franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Clarion Pointe, Sleep Inn, Ascend Hotel Collection, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Studios, WoodSpring Suites, Everhome Suites, Cambria Hotels, Radisson Blu, Radisson RED, Radisson, Park Plaza, Country Inn & Suites by Radisson, Radisson Inn & Suites, Park Inn by Radisson, Radisson Individuals, and Radisson Collection. Choice Hotels International, Inc. was founded in 1939 and is headquartered in North Bethesda, Maryland.
About Cheesecake Factory
The Cheesecake Factory Incorporated operates and licenses restaurants in the United States and Canada. The company operates bakeries that produce cheesecakes and other baked products for its restaurants, international licensees, third-party bakery customers, external foodservice operators, retailers, and distributors. It operates restaurants under the brands comprising The Cheesecake Factory, North Italia, Flower Child, Fox Restaurant Concepts. The Cheesecake Factory Incorporated was founded in 1972 and is headquartered in Calabasas, California.
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