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1. Company Snapshot

1.a. Company Description

Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally.The company operates and franchises restaurants under the Texas Roadhouse, Bubba's 33, and Jaggers names.As of December 28, 2021, it operated 566 domestic restaurants and 101 franchise restaurants.


Texas Roadhouse, Inc.was founded in 1993 and is based in Louisville, Kentucky.

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1.b. Last Insights on TXRH

Texas Roadhouse's recent performance was negatively impacted by a Q2 earnings miss, with EPS of $1.86 per share, falling short of the Zacks Consensus Estimate of $1.95 per share. The company's comparable sales growth is slowing to historical levels, and margins are under pressure from cost inflation. Additionally, the departure of its CFO, Chris Monroe, may have contributed to investor uncertainty. Valuation concerns are also raised, with an elevated 28x forward earnings multiple. (Source: Texas Roadhouse: Coming Back Down To Earth)

1.c. Company Highlights

2. Texas Roadhouse Delivers Mixed Q3 Results Amidst Inflationary Pressures

Texas Roadhouse reported a revenue of $1.4 billion for the third quarter, driven by a 4.3% traffic growth and 1.8% increase in average check, resulting in same-store sales growth. However, diluted earnings per share decreased by 0.8% to $1.25, missing estimates of $1.28. Restaurant margin dollars per store week decreased 5.3% to approximately $22,500, and restaurant margin as a percentage of total sales decreased 168 basis points year-over-year to 14.3%. Food and beverage costs as a percentage of total sales were 35.8% for the third quarter, highlighting the impact of commodity inflation.

Publication Date: Nov -10

📋 Highlights
  • Revenue Growth:: Q3 revenue reached $1.4 billion, driven by 4.3% traffic growth and 1.8% average check increase.
  • Expansion Plans:: Aims to open 35 company-owned restaurants in 2026, including 20 Texas Roadhouses and 10 Bubba’s 33 locations.
  • Commodity Inflation:: 2025 inflation expected at 6%, rising to 7% in 2026, with beef prices as a key driver.
  • Margin Pressure:: Restaurant margin dollars per store week fell 5.3% to $22,500, and margin as a % of sales dropped 168 bps to 14.3%.
  • Digital Adoption:: 95% of units now use the digital kitchen system, enhancing operational efficiency and decision-making.

Commodity Inflation and Pricing Strategy

The company expects commodity inflation to be around 6% for 2025, with beef prices being a significant factor, and guides for 2026 commodity inflation of around 7%. The pricing strategy is based on local market conditions, with a 3.1% price increase fully in effect, and a 2.5% check increase. As stated by the company, "we weigh the potential impact of pricing on managing partner pay and consider factors such as inflation and beef costs."

Unit Growth and Development

The company opened 7 company-owned locations, including 2 Bubba's 33 restaurants and 1 Jagger's, and expects to open approximately 35 company-owned restaurants in 2026. The development pace is increasing, driven by Bubba's 33 growth, with approximately 20 new Texas Roadhouse locations planned for 2026. The company is also expanding its presence across the United States through its Heartland strategy.

Valuation and Growth Prospects

With a P/E Ratio of 25.07 and an expected revenue growth of 10.5% next year, the company's valuation appears to be reasonable. The ROE of 30.92% and ROIC of 16.88% indicate strong profitability. The company's retail business is also showing promise, with inspired-by products flying off the shelves, driven by brand awareness.

Outlook and Conclusion

The company's top-line growth is expected to continue at a healthy traffic pace, with low single-digit dollar per store week growth in other operating expenses. The inflation guidance for 2026 is driven by beef costs, with a mix of year-over-year lap and actual cost increases. Overall, Texas Roadhouse's strong brand and healthy top-line growth position it for continued profitability and growth.

3. NewsRoom

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Texas Roadhouse, Inc. (NASDAQ:TXRH) Receives Consensus Rating of “Moderate Buy” from Analysts

Dec -04

Source: defenseworld.net

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Market Today: Deal Talks, Retail Wins, AI Chips, and Crypto Volatility

Dec -02

Source: gurufocus.com

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First Look: Versace deal, crypto slump, WBD bids and Airbus woes

Dec -02

Source: gurufocus.com

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Bahl & Gaynor Inc. Trims Holdings in Texas Roadhouse, Inc. $TXRH

Nov -22

Source: defenseworld.net

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Allworth Financial LP Has $210,000 Stock Holdings in Texas Roadhouse, Inc. $TXRH

Nov -19

Source: defenseworld.net

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Analyzing Texas Roadhouse (NASDAQ:TXRH) and iPic Entertainment (OTCMKTS:IPIC)

Nov -18

Source: defenseworld.net

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Market Today: SoftBank exits Nvidia; Ford doubles on EVs

Nov -11

Source: gurufocus.com

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Texas Roadhouse Attracts Investment from Judah Spinner's BlackBird Financial for Its Robust Store-Level Economics and Expansion Outlook

Nov -11

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.92%)

6. Segments

Texas Roadhouse

Expected Growth: 9%

Texas Roadhouse's 9% growth is driven by increasing same-store sales, expansion into new markets, and effective marketing strategies. The company's focus on providing high-quality food at affordable prices, combined with its unique dining experience, has led to increased customer loyalty and retention. Additionally, its strong brand reputation and efficient operations have enabled the company to maintain profitability while expanding its footprint.

Bubba's 33

Expected Growth: 8%

Bubba's 33, a fast-casual concept from Texas Roadhouse, Inc., achieves 8% growth driven by increasing brand awareness, strategic location expansion, and a loyal customer base. Menu innovation, digital marketing, and operational efficiency also contribute to its success. Additionally, the brand's focus on sports and entertainment, as well as its unique atmosphere, attract a wide range of customers, further fueling growth.

Reconciling Items

Expected Growth: 7%

Texas Roadhouse, Inc.'s 7% growth is driven by increasing same-store sales, expansion of restaurant count, and rising average unit volume. Additionally, effective menu pricing, improved labor productivity, and strategic marketing initiatives contribute to the growth. Furthermore, the company's focus on digital transformation, including online ordering and mobile apps, enhances the customer experience and drives sales.

Other

Expected Growth: 6%

Texas Roadhouse's 6% growth is driven by increasing same-store sales, successful menu price increases, and expansion of its restaurant count. Additionally, the company's focus on improving operational efficiency, investing in digital capabilities, and enhancing the customer experience through remodels and technology upgrades also contribute to its growth momentum.

7. Detailed Products

Hand-Cut Steaks

Texas Roadhouse offers a variety of hand-cut steaks, including Ribeye, Sirloin, and Filet Mignon, all made to order and cooked to perfection.

Fall-Off-The-Bone Ribs

Our ribs are slow-cooked to fall-off-the-bone tenderness and slathered in our signature BBQ sauce.

Made-From-Scratch Sides

Our sides are made from scratch in-house every day, including our famous mashed potatoes, green beans, and sweet potatoes.

Fresh Salads

Our fresh salads are made with crisp lettuce, fresh vegetables, and topped with your choice of protein.

Homemade Biscuits

Our famous homemade biscuits are baked fresh in-house every day and served with a side of honey butter.

Lunch Specials

Our lunch specials include a variety of options, including sandwiches, salads, and entrees, all at an affordable price.

8. Texas Roadhouse, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Texas Roadhouse, Inc. faces moderate threat from substitutes, as customers have various dining options, including cooking at home, ordering takeout, or visiting other restaurants. However, the company's unique menu offerings and affordable prices help mitigate this threat.

Bargaining Power Of Customers

Customers have limited bargaining power due to Texas Roadhouse, Inc.'s strong brand reputation and loyal customer base. The company's focus on quality, value, and customer service helps maintain customer loyalty and reduces the threat of customer bargaining power.

Bargaining Power Of Suppliers

Suppliers have moderate bargaining power due to the company's dependence on a few key suppliers for ingredients and materials. However, Texas Roadhouse, Inc.'s large scale of operations and long-term contracts help mitigate this threat.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the casual dining industry, including significant capital requirements, regulatory hurdles, and the need for a strong brand reputation. Texas Roadhouse, Inc.'s established brand and scale of operations provide a competitive advantage.

Intensity Of Rivalry

The casual dining industry is highly competitive, with many established players and a high level of rivalry. Texas Roadhouse, Inc. faces intense competition from other casual dining chains, which can lead to pricing pressure and marketing expenses.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 40.31%
Debt Cost 3.95%
Equity Weight 59.69%
Equity Cost 8.97%
WACC 6.94%
Leverage 67.52%

11. Quality Control: Texas Roadhouse, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Darden

A-Score: 6.3/10

Value: 3.9

Growth: 6.0

Quality: 5.2

Yield: 6.0

Momentum: 8.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Wendy's

A-Score: 5.6/10

Value: 6.3

Growth: 5.9

Quality: 4.8

Yield: 9.0

Momentum: 0.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Domino's Pizza

A-Score: 5.5/10

Value: 4.4

Growth: 6.3

Quality: 6.0

Yield: 3.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Texas Roadhouse

A-Score: 5.5/10

Value: 2.6

Growth: 8.2

Quality: 5.7

Yield: 4.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Brinker

A-Score: 5.3/10

Value: 5.8

Growth: 8.0

Quality: 5.4

Yield: 0.0

Momentum: 8.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Wingstop

A-Score: 4.2/10

Value: 2.5

Growth: 9.4

Quality: 6.3

Yield: 2.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

166.27$

Current Price

166.27$

Potential

-0.00%

Expected Cash-Flows