Security Analysis

Security Analysis

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Security Analysis
Security Analysis
Texas Roadhouse (TXRH)
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Texas Roadhouse (TXRH)

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Value Stock Geek
Aug 25, 2024
∙ Paid
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Security Analysis
Security Analysis
Texas Roadhouse (TXRH)
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a restaurant with wooden booths and american flags on the wall
Photo by Joshua Leong on Unsplash

Key Statistics

EV/EBIT = 27.3x

ROE = 31.5%

Debt/Equity = 64%

FCF Yield = 6.1%

Dividend Yield = 1.4%

Market Cap = $11.25 billion

The Company

Texas Roadhouse (TXRH) is an American restaurant chain.

Texas Roadhouse provides affordable, high-quality meals with friendly service. Their menu includes hand-cut steaks, ribs, seafood, and burgers, all accompanied by complimentary peanuts and freshly baked rolls. The restaurant emphasizes freshly prepared food, with management inspecting each entrée to ensure it meets their standards.

Texas Roadhouse is well-known for its competitive pricing, with most locations focusing on dinner service.

A typical meal costs between $15 and $25—a fantastic value, especially when you consider that a significantly lower-quality meal at McDonald's can easily cost $13. For example, an 8-ounce NY strip steak with a side of vegetables and a loaded baked potato is just $19. The restaurant's popularity is undeniable; locations are consistently packed. Living near one, I’ve noticed that the parking lot is always full.

Texas Roadhouse stands as one of my personal "sins of omission" in investing. After visiting my first location in 2006, I was consistently impressed by the incredible value. Despite my enthusiasm for the restaurant, I never acted on it and bought shares in the company. This was a mistake, as $10,000 invested back then would be worth over $150,000 today.

Before writing this article, I returned to a location I hadn't visited since before the pandemic. I’m 42-years-old-going-on-72, so my wife and I chose a 4:30 PM visit, expecting it to not be too crowded due to the early time. To my surprise, the place was already buzzing with activity, and the food (I had an NY strip and a baked potato) was every bit as delicious as I remembered. The service was also very good.

In addition to Texas Roadhouse, the company operates Bubba's 33, a casual dining spot with a rock 'n' roll atmosphere, offering burgers, pizza, wings, and more. They also run Jaggers, a fast-casual concept known for its burgers, chicken tenders, fresh salads, and convenient service options like drive-thru, carry-out, and dine-in.

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