Question

Which stock do you expect to perform better over the next 12 months in 2019, Starbucks or Cheesecake Factory? Provide justification for your opinion using economic, industry, or firm-specific financial data. As you look at the two companies, be sure to consider future analyst expectations for earnings, cash flow and dividend growth. Other important factors are market share expectations, pricing, margins, and of course valuation measures. The link below bring you to the needed data Starbucks financials and analyst https://finance.yahoo.com/quote/SBUX/financials?p=SBUX https://finance.yahoo.com/quote/sbux/analysis?ltr=1 Cheesecake financial and analyst https://finance.yahoo.com/quote/CAKE/financials?p=CAKE&.tsrc=fin-srch https://finance.yahoo.com/quote/CAKE/analysis?p=CAKE

Answer 1

The first thing that i do during my fundamental analysis on a company i would like to review the all the quality aspects of the company and understanding the business w.r.t the industry in which it operates as i have gone through the business models of both the Starbucks corporation and The Cheese cake factory Incorporated both are into food form of business according to GICS.

So firstly understanding the qualitative aspects of the company such as Management's background, Business ethics, Corporate governance, Share holders, Operator activity in stocks, Political affiliation, Promoter life style looking at all these within a limited time at glance as i always do. I always go to the next step only if all the above mentioned aspects are completely positive and on the healthy side on a growth perspective.

Coming to the financial data available through the above links i have used my defaulted constructed excel sheets which i have to calculate all the Financial ratios of the company just by inputting the values for Profitability, Leverage and Valuation ratios. As all these calculations can be easily done by yourself as well using excel simply by using the values provided in the above links.

Basing on the values that i generated among three ratios, I have put it into my next step of things which take few variables into consideration like

1.Gross profit margin - higher margin higher sustainability.

2.EPS - should be in line and consistent with net profit.

3.Debt level should be considered.

4.Revenue growth - revenue to profit should be checked.

5.Sales vs receivables as both the companies have products to push.

5.Cash flow from operations if that is negative or very less to average its a bad sign.

6.Return on equity levels in consideration with the level of debt need to be checked.

As per my analysis and understanding both companies shows similar percentage of change year on year but comparing the size of the company and the business model they vary.

Among quality aspects Starbucks corporation took over The Cheese cake factory as Starbucks corporation has higher rating in the qualitative aspects a company should have basing on my list that i mentioned above.

Basing on the estimated free cash flows by obtaining the Net present value for 1 year.

Starbucks corporation shows a promising increase sign.