Texas Roadhouse, Inc. (TXRH) Stock Analysis and Metrics

Sector: Consumer Cyclical Industry: Restaurants CIK: 0001289460

Market Cap 11.11 Bn

P/B 7.61

P/E 25.44

P/S 1.90

ROIC (Qtr) 18.78

Div Yield % 1.99

Rev 1y % (Qtr) 12.83

Total Debt (Qtr) 933.74 Mn

Debt/Equity (Qtr) 0.64

About

Texas Roadhouse, Inc., often recognized by its NASDAQ ticker symbol TXRH, is a thriving player in the casual dining industry. Established in 2004, the company has expanded its reach to 49 states and ten foreign countries, operating three unique concepts across 741 restaurants. The company's primary business activities revolve around the operation of full-service, casual dining restaurants. Texas Roadhouse, one of its concepts, offers a diverse menu including steaks, ribs, seafood, chicken, pork chops, and vegetable plates, accompanied by a variety...

Texas Roadhouse, Inc., often recognized by its NASDAQ ticker symbol TXRH, is a thriving player in the casual dining industry. Established in 2004, the company has expanded its reach to 49 states and ten foreign countries, operating three unique concepts across 741 restaurants.

The company's primary business activities revolve around the operation of full-service, casual dining restaurants. Texas Roadhouse, one of its concepts, offers a diverse menu including steaks, ribs, seafood, chicken, pork chops, and vegetable plates, accompanied by a variety of appetizers, sandwiches, and salads. The other concept, Bubba's 33, presents a different menu featuring burgers, pizza, and wings. These offerings cater to a broad market, including families, couples, and individuals seeking a relaxed dining experience.

Revenue for Texas Roadhouse is primarily generated through the sale of food and beverages at its restaurants. Its customer base is diverse, encompassing families, couples, and individuals. The company's restaurants are strategically located in various settings such as freestanding buildings, shopping centers, and malls, ensuring accessibility to a wide range of potential customers.

In the competitive landscape of the casual dining segment, Texas Roadhouse holds a strong position. It competes with notable names like Olive Garden, Red Lobster, and Cracker Barrel. The company's competitive advantages lie in its high-quality food, friendly service, and unique atmosphere, which distinguish it from its peers.

The company's financial performance has been commendable, with consistent revenue growth and increasing profitability over the past few years. Specifically, the company's net income rose from $64.5 million in 2020 to $84.1 million in 2023, reflecting a compound annual growth rate of 11.1%. Similarly, the company's revenue increased from $1.4 billion in 2020 to $1.7 billion in 2023, representing a compound annual growth rate of 6.1%.

In terms of its product and service brands, Texas Roadhouse operates under two main segments: Texas Roadhouse and Bubba's 33. The Texas Roadhouse segment includes the company's full-service, casual dining restaurants offering a wide variety of menu items. On the other hand, the Bubba's 33 segment includes the company's full-service, casual dining restaurants that offer a variety of menu items. These segments reflect the company's commitment to providing a diverse range of dining options to its customers.

Price action

Investment thesis

Bull case

Strong operating cash flow of 747.14M provides robust 0.80x coverage of total debt 933.74M, indicating excellent debt servicing capability and financial flexibility.
Healthy cash reserves of 108.17M provide 3.61x coverage of short-term debt 29.96M, demonstrating strong liquidity position and minimal refinancing risk.
Operating cash flow of 747.14M provides strong 15.02x coverage of stock compensation 49.73M, indicating sustainable incentive practices.
Operating cash flow of 747.14M provides exceptional 79.43x coverage of minority interest expenses 9.41M, showing strong core operations.
Strong tangible asset base of 3.02B provides 3.24x coverage of total debt 933.74M, indicating robust asset backing and low credit risk.

Bear case

Operating cash flow of 747.14M barely covers its investment activities of (483.89M), with a coverage ratio of -1.54, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Operating cash flow of 747.14M provides thin coverage of dividend payments of (176.03M) with a -4.24 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
Cash reserves of 108.17M provide limited coverage of acquisition spending of (92.90M), which is -1.16x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
Operating earnings of 507.34M show weak coverage of depreciation charges of 201.41M, with a 2.52 ratio indicating high capital intensity and potential reinvestment needs.
Free cash flow of 342.98M represents just -224.90x of debt issuance (1.52M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Restaurants

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	MCD	Mcdonalds Corp	222.05 Bn	26.39	8.45	55.82 Bn
2	SBUX	Starbucks Corp	95.51 Bn	51.45	2.57	26.61 Bn
3	CMG	Chipotle Mexican Grill Inc	50.94 Bn	33.15	4.32	4.98 Bn
4	YUM	Yum Brands Inc	43.17 Bn	29.83	5.36	11.55 Bn
5	QSR	Restaurant Brands International Inc.	22.43 Bn	24.33	2.42	15.64 Bn
6	DRI	Darden Restaurants Inc	21.91 Bn	19.91	1.77	6.16 Bn
7	YUMC	Yum China Holdings, Inc.	18.12 Bn	20.05	1.57	1.84 Bn
8	DPZ	Dominos Pizza Inc	14.57 Bn	24.72	3.01	5.05 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	3.63	2.05
EV to Cash from Ops. EV/CFO	15.87	16.57
EV to Debt EV to Debt	12.70	4.75
EV to EBIT EV/EBIT	23.37	3.45
EV to EBITDA EV/EBITDA	16.52	9.76
EV to Free Cash Flow [EV/FCF] EV/FCF	34.58	29.06
EV to Market Cap EV to Market Cap	1.07	6.55
EV to Revenue EV/Rev	2.03	2.40
Price to Book Value [P/B] P/B	7.61	-1.40
Price to Earnings [P/E] P/E	25.44	13.35

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	2.48	-9.56
Dividend Payout Ratio % Div Payout % (Qtr)	40.30	18.72
Dividend per Basic Share Div per Share (Qtr)	2.65	0.84
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	51.27	30.41
Interest Coverage Int. cover (Qtr)	-74.90	-86.85

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	-15.75	-24.56
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	-42.83	35.50
Dividend Growth (1y) % Div 1y % (Qtr)	11.34	-0.72
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	11.18	-564.81
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	13.77	25.78
EBIT Growth (1y) % EBIT 1y % (Qtr)	11.68	-507.68
EBT Growth (1y) % EBT 1y % (Qtr)	12.43	-41.98
EPS Growth (1y) % EPS 1y % (Qtr)	12.31	-126.51
FCF Growth (1y) % FCF 1y % (Qtr)	0.53	5,724.78
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	11.22	23.70

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	1.79	0.99
Cash Payout Ratio Cash Payout (Qtr)	0.15	0.07
Cash Ratio Cash Ratio (Qtr)	0.16	0.78
Current Ratio Curr Ratio (Qtr)	0.36	1.47
Debt to Equity Ratio Debt/Equity (Qtr)	0.64	0.05
Interest Cover Ratio Int Coverage (Qtr)	-74.90	-86.85
Times Interest Earned Times Interest Earned (Qtr)	-74.90	-86.85

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	12.10	7.71
EBIT Margin % EBIT Margin % (Qtr)	8.70	-2.27
EBT Margin % EBT Margin % (Qtr)	8.81	-1.97
Gross Margin % Gross Margin % (Qtr)	18.30	34.04
Net Profit Margin % Net Margin % (Qtr)	7.50	-3.69

Texas Roadhouse, Inc. (NASDAQ: TXRH)

About

Price action

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Bull case

Bear case

Peer comparison

Industry comparisons

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