Texas Roadhouse
TXRH
$170.94
-2.54%
Texas Roadhouse, Inc. is a prominent operator in the casual dining restaurant industry, known for its moderately priced, full-service steakhouses offering a menu of steaks, ribs, seafood, and other American fare. The company is a market leader in its segment, distinguished by its strong value proposition, consistent execution, and a culture focused on hospitality, which has fostered a loyal customer base and industry-leading unit economics. The current investor narrative centers on the stock's recent volatility and its relative performance within a shifting casual dining landscape, where value-focused chains are gaining traffic share, though Texas Roadhouse faces investor scrutiny over margin pressures and its ability to sustain growth amidst broader economic concerns.…
TXRH
Texas Roadhouse
$170.94
Related headlines
TXRH 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Texas Roadhouse's 12-month outlook, with a consensus price target around $222.22 and implied upside of +30.0% versus the current price.
Average Target
$222.22
4 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
4
covering this stock
Price Range
$137 - $222
Analyst target range
Analyst coverage for Texas Roadhouse is limited, with only 4 analysts providing estimates, indicating it may be less followed by the institutional research community despite its $11.1 billion market cap; this can lead to higher volatility and less efficient price discovery. The available institutional ratings from firms like Morgan Stanley (Overweight), BTIG (Buy), and Wells Fargo (Overweight) show a generally positive but cautious bias, with several firms maintaining Neutral or Hold ratings; the recent downgrade by Truist Securities from Buy to Hold in February 2026 is a notable signal of growing caution. Without a published consensus target price in the provided data, the implied upside or downside cannot be calculated, but the pattern of recent ratings actions and the limited number of analysts suggest a wait-and-see approach is prevalent, with investors likely focused on the company's ability to navigate cost inflation and protect its industry-leading margins.
Bulls vs Bears: TXRH Investment Factors
The investment debate for Texas Roadhouse centers on the tension between its superior brand equity and operational execution, evidenced by a 27.76% ROE, and the severe, ongoing pressure on its core profitability from cost inflation. The bull case is supported by robust free cash flow generation ($730.1M TTM) and a recent 13% price surge suggesting a potential trend reversal. However, the bear case is grounded in concrete financial deterioration, most notably the 680-basis-point collapse in gross margin year-over-year. Currently, the bearish evidence holds stronger weight due to the material and quantifiable impact of margin compression on earnings, which directly challenges the stock's premium valuation. The single most important factor that will determine the stock's direction is whether management can stabilize and recover gross margins in the coming quarters without sacrificing traffic growth.
Bullish
- Robust Free Cash Flow Generation: The company generated $730.1 million in TTM free cash flow, providing significant internal funding for growth, dividends, and share repurchases. This strong cash generation, with a dividend payout ratio of 44.4%, supports shareholder returns and mitigates balance sheet concerns despite a high debt-to-equity ratio of 1.29.
- Industry-Leading Profitability Metrics: Texas Roadhouse maintains superior returns on capital, evidenced by a trailing Return on Equity (ROE) of 27.76%. This figure is significantly above typical industry peers, demonstrating the brand's strong unit economics and operational efficiency.
- Positive Revenue Growth Amid Deceleration: Q4 2025 revenue grew 3.1% year-over-year to $1.48 billion. While this represents a deceleration from earlier quarters, it shows the company is still gaining traffic and market share in a challenging casual dining environment, as highlighted by recent news on the segment's 'awakening'.
- Strong Recent Price Momentum: The stock surged 13.01% over the past month, significantly outperforming the S&P 500's 6.31% gain. The sharp rally from the $155.88 low on May 4th to ~$180 suggests a potential trend reversal and renewed investor confidence following a prolonged downtrend.
Bearish
- Severe Gross Margin Compression: Gross margin plummeted to 10.7% in Q4 2025 from 17.5% in Q4 2024, a contraction of 680 basis points. This dramatic squeeze, driven by food and labor cost inflation, directly threatens the company's profitability and its ability to sustain its premium valuation.
- Valuation Premium to Sector Peers: With a trailing P/E of 27.38x and a forward P/E of 23.62x, Texas Roadhouse trades at a significant premium to typical restaurant industry averages (often in the low 20s). This premium leaves the stock vulnerable to multiple compression if earnings growth fails to materialize.
- Significant Long-Term Underperformance: The stock's 1-year price change is -7.75%, underperforming the S&P 500 by over 35 percentage points. This stark divergence indicates persistent negative sentiment and selling pressure, reflecting investor concerns over growth deceleration and margin pressures.
- Limited Analyst Coverage & Downgrade: Only 4 analysts provide estimates, suggesting lower institutional visibility and potential for higher volatility. The recent downgrade by Truist Securities from Buy to Hold in February 2026 signals growing caution among the limited coverage universe.
TXRH Technical Analysis
The stock is in a pronounced downtrend over the past year, evidenced by a 1-year price change of -7.75%, significantly underperforming the S&P 500's +28.21% gain. Currently trading at $180.62, the price sits approximately 62% of its 52-week range ($153.83 to $197.00), indicating it is closer to the yearly lows than highs, which may suggest a potential value opportunity but also reflects persistent selling pressure and negative momentum. Recent short-term momentum shows a sharp divergence, with a strong 1-month gain of +13.01% contrasting the negative 3-month and 1-year trends; this recent surge, which includes a major gap up on May 8th, suggests a potential trend reversal or a significant relief rally, though it remains to be seen if it can overcome the established downtrend. Key technical levels are clearly defined, with immediate resistance at the 52-week high of $197.00 and support at the 52-week low of $153.83; a sustained breakout above $197 would signal a bullish trend change, while a breakdown below $153.83 could trigger further declines. The stock's beta of 0.778 indicates it is about 22% less volatile than the broader market, which is notable given its recent price swings and suggests its moves may be more idiosyncratic to company-specific news rather than macro-driven.
Beta
0.78
0.78x market volatility
Max Drawdown
-22.0%
Largest decline past year
52-Week Range
$154-$197
Price range past year
Annual Return
-12.2%
Cumulative gain past year
| Period | TXRH Return | S&P 500 |
|---|---|---|
| 1m | +8.0% | +5.4% |
| 3m | -4.3% | +10.9% |
| 6m | +2.3% | +11.0% |
| 1y | -12.2% | +28.1% |
| ytd | -0.2% | +11.4% |
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TXRH Fundamental Analysis
Revenue growth remains positive but has decelerated, with Q4 2025 revenue of $1.48 billion representing a year-over-year increase of 3.1%; however, this marks a slowdown from the stronger growth rates seen in prior quarters of 2025 (e.g., Q2 revenue was $1.51 billion), indicating potential moderation in the top-line expansion trajectory. The company is solidly profitable, posting Q4 net income of $84.6 million and a trailing net margin of 6.9%, but profitability metrics have compressed, as the Q4 gross margin of 10.7% is significantly lower than the 17.5% reported in Q4 2024, highlighting substantial cost pressures, particularly in food and labor, that are squeezing margins. Financially, the balance sheet is leveraged but supported by strong cash generation, with a debt-to-equity ratio of 1.29 and a current ratio of 0.50 indicating limited short-term liquidity; however, robust trailing twelve-month free cash flow of $730.1 million provides ample internal funding for growth initiatives, dividends (payout ratio of 44.4%), and share repurchases, mitigating balance sheet concerns.
Quarterly Revenue
$1.5B
2025-12
Revenue YoY Growth
+0.03%
YoY Comparison
Gross Margin
+0.10%
Latest Quarter
Free Cash Flow
$730067000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TXRH Overvalued?
Given positive net income, the primary valuation metric is the Price-to-Earnings (PE) ratio. The stock trades at a trailing PE of 27.38x and a forward PE of 23.62x based on estimated EPS; the forward multiple being lower suggests the market anticipates earnings growth, though the modest discount implies expectations are tempered, possibly due to margin concerns. Compared to sector averages, Texas Roadhouse's valuation appears elevated; its trailing PE of 27.38x is above typical restaurant industry averages (often in the low 20s), indicating a premium that the market awards for its consistent execution and strong brand equity, which may be justified by its superior return on equity of 27.76% relative to many peers. Historically, the current trailing PE of 27.38x is below the stock's own recent peaks seen in 2024 (e.g., 34.69x in Q3 2024) but above levels from early 2023 (around 20-22x), placing it in the mid-to-upper range of its recent historical band, suggesting the stock is not cheap on an absolute basis and that significant multiple expansion may be limited without a re-acceleration in earnings growth.
PE
27.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~35x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.7x
Enterprise Value Multiple
Investment Risk Disclosure
Financially, Texas Roadhouse faces significant margin risk, with Q4 gross margin collapsing to 10.7% from 17.5% a year prior. This pressure, if sustained, could erode its industry-leading profitability and challenge its ability to grow earnings to justify a forward P/E of 23.6x. The company's debt-to-equity ratio of 1.29 indicates a leveraged balance sheet, though this is partially offset by strong free cash flow. Operationally, revenue growth has decelerated to 3.1% YoY in Q4, raising concerns about its ability to maintain top-line momentum in a competitive casual dining landscape.
From a market and competitive standpoint, the stock's premium valuation is a key risk. Its trailing P/E of 27.4x is elevated relative to the restaurant sector, making it susceptible to valuation compression if growth disappoints or sector rotation occurs. The stock's beta of 0.78 suggests it is less volatile than the market, but its 1-year underperformance of -7.75% vs. the S&P 500's +28.2% gain shows it is facing significant idiosyncratic, company-specific headwinds. Recent news highlights a shift in dining patterns favoring value-priced sit-down restaurants, which is a tailwind, but also intensifies competition within that niche.
The worst-case scenario involves a continuation of gross margin erosion coupled with a deceleration in same-store sales growth. This could trigger a downward earnings revision cycle, leading analysts to cut estimates and the market to de-rate the stock's premium multiple. A realistic downside could see the stock re-testing its 52-week low of $153.83, representing a potential decline of approximately -15% from the current price of $180.62. A more severe bear case, incorporating a multiple contraction towards the sector average, could imply further downside towards the $140-$150 range.