Texas Roadhouse, Inc.

Analysis of Texas Roadhouse (TXRH)

Technical Perspective TXRH's technical picture shows a recent one-month pullback of 6.3%, but this appears to be a consolidation within a healthy larger uptrend, as evidenced by its strong 8.6% three-month gain that significantly outpaces the broader market. The stock is positioned neutrally within its 52-week range, suggesting it is neither overextended nor oversold at current levels, leaving room for a potential resumption of its upward momentum.

Fundamental Strength The company demonstrates impressive operational consistency with stable revenue growth, a robust gross profit margin above 72%, and disciplined cost control. Its financial health is solid, characterized by a low debt level, ample cash reserves, and strong operational cash flows that mitigate a weaker current ratio. High returns on assets and capital employed confirm management's efficiency in utilizing its resources effectively.

Valuation & Risk Considerations Valuation remains the primary concern, with elevated multiples like a forward P/E of 32.7 and an extremely high EV/EBITDA of 78.9 signaling that substantial future growth is already priced into the stock. Risks are moderated by the stock's lower volatility profile and lack of short interest, though the company remains exposed to industry-wide pressures like fluctuating consumer spending and input costs.

Investment Recommendation Texas Roadhouse is a high-quality operator with a strong brand and excellent financials, making it a compelling long-term holding. However, its current valuation is demanding and requires flawless execution to justify. For investors with a long-term horizon who are comfortable paying a premium for quality, TXRH represents a *cautious buy* on any meaningful pullbacks. Waiting for a better entry point would be a prudent strategy to mitigate valuation risk.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on my analysis, the 12-month outlook for Texas Roadhouse (TXRH) is cautiously optimistic, balancing its strong operational performance against a demanding valuation.

Key catalysts are likely to be continued market-share gains driven by its strong brand reputation, operational efficiency, and stable revenue growth, which could support further upside if the company meets or exceeds high expectations. The primary risk is valuation compression; with multiples like a forward P/E of 32.7, the stock is highly vulnerable to any disappointment in earnings or a broader market shift away from premium-priced stocks. While a specific analyst target isn't provided, the stock's momentum and quality suggest a potential upside, but a realistic target range would likely be conservative, perhaps in the high $180s to low $200s, contingent on flawless execution justifying its current premium.

Wall Street Consensus

Most Wall Street analysts are optimistic about Texas Roadhouse, Inc.'s 12-month outlook, with consensus target around $182.53, indicating expected upside potential.

Overall, TXRH has investment potential but also faces challenges. Here are key factors to weigh before investing.

TXRH has demonstrated mixed performance, declining over the past month but showing solid gains on a three-month basis, with its fundamental appeal as a lower-volatility restaurant stock remaining intact.

Short-term, the stock has experienced a 6.3% pullback over one month but maintains a strong 8.6% gain over three months, significantly outperforming the broader market by nearly 7% during that period. This recent weakness appears to be a consolidation within a larger uptrend rather than a reversal.

Currently trading approximately 18% above its 52-week low and 9% below its all-time high, TXRH sits in a neutral position within its range. Given its positive long-term momentum but recent one-month decline, the stock is neither clearly overbought nor oversold at this level.

Revenue & Profitability Texas Roadhouse demonstrates stable performance with Q4 2025 revenue of $1.48 billion, slightly up from Q3’s $1.44 billion. Profitability remains solid, evidenced by a robust gross profit margin of 72.07% in Q4 and a steady net income ratio of 5.71%. The company maintains consistent operating income ratios, reflecting effective cost control despite varying seasonal demand.

Financial Health TXRH exhibits strong financial health with a low debt ratio of 26.57%, indicating minimal leverage and a conservative capital structure. The absence of interest expense and substantial cash per share of $2.04 underscores ample liquidity. However, the current ratio of 0.15 suggests potential short-term liquidity constraints, though mitigated by strong operational cash flows.

Operational Efficiency Operational efficiency is favorable, with a return on assets of 2.38% and a healthy asset turnover of 0.42, reflecting effective utilization of assets to drive revenue. The return on capital employed of 3.66% indicates competent capital deployment. TXRH’s fixed asset turnover of 0.55 highlights efficient use of property and equipment in generating sales.

Based on the available metrics, Texas Roadhouse appears significantly overvalued. The trailing P/E of 27.4 is elevated for a restaurant chain, but the forward P/E of 32.7 indicates expectations for even higher earnings are already priced in. The extremely high EV/EBITDA ratio of 78.9 and a PEG ratio far exceeding 1.0 further confirm that the current stock price incorporates substantial future growth, making the valuation stretched.

A peer comparison using industry averages is not possible due to the lack of provided benchmark data. Consequently, this analysis is based solely on absolute valuation metrics, which signal overvaluation. To complete the assessment, comparing these figures against the average P/E, Price-to-Book, and EV/EBITDA ratios for the restaurant industry would be necessary for proper context.

Volatility Risk: TXRH exhibits moderate volatility risk relative to the broader market, as indicated by its Beta of 0.873, suggesting its price moves are generally less pronounced than market swings. This is supported by a manageable one-year maximum drawdown of -20.8%, which, while significant, reflects a typical risk profile for a stable restaurant stock rather than extreme vulnerability.

Other Risks: A notable positive is the apparent absence of short interest, indicating minimal speculative pressure or bearish sentiment from investors. However, the reliance on factors such as consumer discretionary spending and food cost inflation remain inherent industry risks that could impact performance irrespective of its current favorable investor positioning.