Texas Roadhouse
TXRH
$169.68
-6.32%
Texas Roadhouse, Inc. operates a portfolio of casual dining restaurant concepts, led by its flagship Texas Roadhouse brand, which offers moderately priced steaks, ribs, seafood, chicken, and burgers, alongside the smaller Bubba's 33 and Jaggers concepts and a retail line of branded merchandise and sauces. With roughly 101,000 employees and a market capitalization near $11 billion, the company is one of the largest full-service casual dining operators in the United States, distinguished by a high-volume, value-oriented model, a heavily franchised-adjacent royalty stream, and a famously strong unit-level economics and culture. The current investor narrative centers on whether Texas Roadhouse can sustain its multi-year streak of positive same-store sales and traffic growth as the casual dining sector undergoes a value-driven rotation, with diners trading down from inflated fast-food prices toward sit-down concepts. Recent headlines highlight this dynamic, with peers such as Chili's posting strong same-store sales growth and analysts debating whether Texas Roadhouse's premium valuation relative to its sector is justified by its superior growth and margin profile. The stock's recent pullback from its 52-week highs has also refocused attention on the company's ability to manage cost inflation and labor pressures while continuing to expand its store base.…
TXRH
Texas Roadhouse
$169.68
Related headlines
Investment Opinion: Should I buy TXRH Today?
We assign a Hold rating on TXRH, balancing its strong revenue growth and analyst optimism against margin pressures and a premium valuation. The consensus analyst rating is 'buy' with an average target of $218.09, implying 20.3% upside, but the recent 15.4% one-month decline and margin contraction warrant caution. The core thesis is that TXRH remains a high-quality operator with defensive characteristics, but near-term headwinds may limit upside until margin trends stabilize.
Supporting evidence includes: 1) Revenue growth of 12.8% YoY in Q1 2026, accelerating from 10.9% in the prior-year quarter; 2) Strong return on equity of 27.8% and operating margin of 8.6%; 3) Free cash flow of $360.6 million, providing ample coverage for the 1.62% dividend yield (44.4% payout ratio); and 4) A low beta of 0.787, offering downside protection. However, the trailing P/E of 27.4x and forward P/E of 23.3x are above the industry average, and the gross margin decline to 12.4% from 17.0% a year ago is a red flag.
The biggest risks that could invalidate the thesis are: 1) Continued margin erosion if food and labor costs remain elevated; 2) Competitive pressures from Chili's and other value-focused chains; and 3) A slowdown in same-store sales growth. We would upgrade to Buy if the stock pulls back to the $160-$165 range (implying a forward P/E below 15x) or if gross margins stabilize above 14%. We would downgrade to Sell if revenue growth decelerates below 8% or if operating margins fall below 7%. Relative to its history and peers, TXRH appears overvalued, trading at a premium that may not be justified by its current growth and margin profile.
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TXRH 12-Month Price Forecast
We maintain a neutral stance on TXRH with medium confidence, balancing strong top-line growth and analyst optimism against significant margin compression and a premium valuation. The company's 12.8% revenue growth and 27.8% ROE are impressive, but the 461 basis point decline in gross margin to 12.4% raises concerns about cost management. The stock's recent 15.4% one-month decline and relative underperformance versus the S&P 500 suggest that investors are already pricing in these risks. We would upgrade to bullish if gross margins stabilize above 14% and same-store sales growth accelerates, or downgrade to bearish if margins fall below 12% or revenue growth decelerates below 8%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Texas Roadhouse's 12-month outlook, with a consensus price target around $218.09 and implied upside of +28.5% versus the current price.
Average Target
$218.09
0 analysts
Implied Upside
+28.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$133 - $276
Analyst target range
Bulls vs Bears: TXRH Investment Factors
The bull case for Texas Roadhouse rests on its accelerating revenue growth (12.8% YoY), strong analyst support (20.3% upside to average target), and defensive characteristics (beta 0.787). However, the bear case highlights a premium valuation (27.4x trailing P/E), significant margin compression (gross margin down 461 bps YoY), and recent relative underperformance (-14.4% vs. S&P 500 over one month). The most critical tension is whether the company can sustain its growth trajectory and pricing power amid rising costs and competitive pressures. Currently, the bear evidence appears slightly stronger due to the margin deterioration and valuation concerns, but the long-term growth story remains intact if margins stabilize.
Bullish
- Revenue Growth Accelerating: Q1 2026 revenue grew 12.82% YoY to $1.633 billion, outpacing the prior year's Q1 growth of 10.9% (from $1.448B to $1.633B). This acceleration suggests Texas Roadhouse is capturing market share in casual dining, supported by industry data showing diners trading down from fast food to value-oriented sit-down concepts.
- Analyst Consensus Strong Buy: 23 analysts rate the stock a 'buy' with an average target price of $218.09, implying 20.3% upside from the current $181.22. The high target of $276 suggests even greater optimism, while the low target of $133 reflects a bear-case floor.
- Robust Profitability and ROE: The company generates a 27.76% return on equity and an 8.55% operating margin, with Q1 2026 net income of $123.4 million (7.56% net margin). This profitability supports continued unit expansion and shareholder returns.
- Low Beta Defensive Growth: With a beta of 0.787, TXRH is significantly less volatile than the broader market, making it an attractive defensive growth play. The stock has gained 8.41% over the past year despite a recent 15.43% one-month decline, highlighting its resilience.
Bearish
- Premium Valuation vs. Peers: TXRH trades at a trailing P/E of 27.4x and forward P/E of 23.3x, with a price-to-book ratio of 7.6x. These multiples are rich for a casual dining company with a 6.9% net margin, especially when compared to peers like Brinker International, which trades at a discount despite similar growth.
- Margin Compression Risk: Gross margin declined to 12.42% in Q1 2026 from 17.03% in Q1 2025, and operating margin fell to 8.55% from 9.31%. This 461 basis point contraction in gross margin signals rising food and labor costs that could pressure earnings if not offset by menu price increases.
- Recent Price Weakness and Relative Underperformance: The stock has dropped 15.43% over the past month, significantly underperforming the S&P 500's -1.06% return, resulting in a relative strength of -14.37%. This sharp decline may indicate waning investor confidence or sector rotation out of consumer cyclical names.
- Liquidity Concerns: The current ratio of 0.497 indicates that current liabilities are nearly double current assets, which could strain short-term liquidity. While restaurant operations often carry low current ratios, this level warrants monitoring, especially with a debt-to-equity ratio of 0.667.
TXRH Technical Analysis
Beta
0.79
0.79x market volatility
Max Drawdown
-20.8%
Largest decline past year
52-Week Range
$154-$216
Price range past year
Annual Return
+2.7%
Cumulative gain past year
| Period | TXRH Return | S&P 500 |
|---|---|---|
| 1m | -18.1% | -2.4% |
| 3m | -2.2% | +2.2% |
| 6m | -1.1% | +14.8% |
| 1y | +2.7% | +14.6% |
| ytd | -1.0% | +11.1% |
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TXRH Fundamental Analysis
Quarterly Revenue
$1.6B
2026-03
Revenue YoY Growth
+12.8%
YoY Comparison
Gross Margin
13.1%
Latest Quarter
Free Cash Flow
$360634999.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TXRH Overvalued?
PE
27.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 18x~35x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
17.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are mounting, as evidenced by the 461 basis point year-over-year decline in gross margin to 12.42% in Q1 2026, which directly threatens profitability. The company's current ratio of 0.497 indicates potential liquidity tightness, with current liabilities nearly double current assets, and a debt-to-equity ratio of 0.667 adds leverage risk. Additionally, the trailing P/E of 27.4x and price-to-book of 7.6x leave little room for earnings disappointments, as any slowdown could trigger a sharp valuation correction. Operational risks include dependence on the flagship Texas Roadhouse concept, which generates the vast majority of revenue, and exposure to commodity and labor cost inflation that has already compressed margins.
Market and competitive risks are significant, with the stock's beta of 0.787 offering some downside protection but not immunity to sector rotations. The casual dining space is intensely competitive, as shown by Chili's 8.6% same-store sales growth and successful value repositioning, which could erode Texas Roadhouse's market share. The recent 15.43% one-month price decline and -14.37% relative strength versus the S&P 500 suggest that investors are already pricing in these concerns. Furthermore, the premium valuation relative to peers like Brinker International (which trades at a discount despite similar growth) increases the risk of multiple compression if growth decelerates.
The worst-case scenario would involve a combination of margin compression, slowing same-store sales, and a broader market downturn, leading to a re-rating of the stock. In such a scenario, the stock could fall to its 52-week low of $153.83, representing a 15.1% decline from the current price of $181.22. If analyst bear-case targets are met, the downside could extend to $133, a 26.6% drop. This would likely occur if Q2 earnings miss expectations, guidance is lowered, and competitive pressures intensify, causing investors to question the premium valuation.
FAQ
The key risks for TXRH include: 1) Margin compression, as gross margin fell to 12.4% in Q1 2026 from 17.0% a year ago, threatening profitability; 2) Competitive pressures from Chili's and other value-focused chains that are gaining same-store sales growth; 3) Valuation risk, with the stock trading at a premium P/E of 27.4x, leaving little room for error; and 4) Liquidity concerns, as the current ratio of 0.497 indicates potential short-term financial strain. Additionally, the stock's recent 15.4% one-month decline and relative underperformance versus the S&P 500 suggest that market sentiment is deteriorating. These risks are ranked from highest to lowest severity, with margin compression being the most immediate threat.
Our 12-month forecast for TXRH includes three scenarios: a bull case (25% probability) with a target range of $240-$276, driven by margin recovery and strong same-store sales; a base case (55% probability) with a target range of $200-$230, assuming steady growth and stable margins; and a bear case (20% probability) with a target range of $133-$160, reflecting margin deterioration and competitive losses. The base case is most likely, hinging on the assumption that gross margins stabilize around 13-14% and revenue growth remains in the 8-10% range. The analyst average target of $218.09 aligns with our base case, suggesting moderate upside from current levels.
TXRH appears overvalued relative to its peers and historical averages. The trailing P/E of 27.4x and forward P/E of 23.3x are above the restaurant industry average of approximately 20x, while the price-to-book ratio of 7.6x is significantly higher than typical for casual dining. The PEG ratio is negative due to the company's low EPS base, but the EV/EBITDA of 17.4x is also elevated. This premium valuation implies that the market expects continued high growth and margin expansion, which may be challenging given the recent gross margin decline to 12.4%. A more reasonable valuation would be a forward P/E of 18-20x, implying a stock price of $180-$200.
TXRH presents a mixed risk/reward profile. On the positive side, the stock offers 20.3% upside to the analyst average target of $218.09, supported by 12.8% revenue growth and a 27.8% ROE. However, the premium valuation (27.4x trailing P/E) and recent 15.4% one-month decline highlight significant risks, including margin compression (gross margin down to 12.4% from 17.0%) and competitive pressures. For long-term investors with a tolerance for volatility, TXRH could be a good buy on further weakness, but near-term headwinds suggest waiting for margin stabilization. A pullback to the $160-$165 range would improve the risk/reward.
TXRH is more suitable for long-term investment, given its strong brand, consistent unit expansion, and defensive beta of 0.787. The company's 1.62% dividend yield and 44.4% payout ratio provide income, while its 27.8% ROE and 12.8% revenue growth support long-term capital appreciation. However, the stock's recent volatility (15.4% one-month decline) and premium valuation make it less attractive for short-term trading. Investors should consider a minimum holding period of 2-3 years to ride out margin cycles and benefit from new store openings. Short-term traders might find opportunities around earnings, but the risk/reward favors a patient, long-term approach.