Texas Roadhouse, Inc. (TXRH): what the price requires
At today's price, Texas Roadhouse, Inc. (TXRH) is priced for +19.1% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/TXRH
Headline
| Field | Value |
|---|---|
| Ticker | TXRH |
| Company | Texas Roadhouse, Inc. |
| Sector / Industry | Consumer Cyclical / Restaurants |
| Current price | $191.70/sh |
| Composition | Texas Roadhouse 94% / Bubba's 33 6% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.4% |
| Operating margin today | 8.7% |
| Margin compression implied | -6.3pp |
| Implied growth | 19.1% |
| Multiple paid | 26x operating income |
The operating-margin requirement is derived from the framework's value band at year 10, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.8pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.73σ |
| cohort percentile (of 210 peers) | 72 |
| sustained it ~5 years at this level | 39% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.76x | 5 | expensive |
| Earnings | 4.14x | 5 | expensive |
| Relative | 1.02x | 3 | expensive |
| Growth | 1.08x | 3 | expensive |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $134.86 | 1.42x | yes | FCF base $0.4B, growth 10% (input: historical growth), terminal g 4.0%, WACC 8.9%, 6yr projection |
| DCF Exit Multiple | Growth | $210.50 | 0.91x | yes | Exit EV/EBITDA: 17.3x / 19.3x / 21.3x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $188.19 | 1.02x | yes | P/E 28x (static sector reference · 2026-04), scenarios: 23.2x / 28.0x / 32.8x (bear / base = reference held flat / bull), EV/EBITDA 18x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $69.37 | 2.76x | yes | BV/sh $22.94, ROE (TTM) 28.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $123.03 | 1.56x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $177.65 | 1.08x | yes | Rev $6.1B, growth 10% (input: historical growth; tapered), Terminal P/S: 1.7x / 2.1x / 2.5x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $48.76 | 3.93x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.41B × (1−14%) / WACC 8.9% → EPV (no growth) |
| Residual Income | Asset | $104.60 | 1.83x | yes | BV $22.94 + 5yr PV of (ROE (TTM) 28.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $56.89 | 3.37x | yes | √(22.5 × EPS $6.27 × BVPS $22.94) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $178.14 | 1.08x | yes | EBITDA $0.70B × sector EV/EBITDA 18.0x |
| FCF Yield | Earnings | $46.27 | 4.14x | yes | FCF $360.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $38.31 | 5.00x | yes | SBC-adj FCF $0.31B (FCF $0.36B − SBC $0.05B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $12.31 | 15.57x | yes | EPS $6.27 × (8.5 + 2×-3.1%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $13.77 | 13.92x | yes | BV $22.94 × (ROIC 5.3% / WACC 8.9%) |
| P/Sales Sector | Relative | $412.68 | 0.46x | yes | Revenue $6.06B × sector P/S 4.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $67.78 | 2.83x | yes | EPS $6.27 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $164.6m |
| Net debt / NOPAT (after-tax) | -0.37x (net cash) |
| Net debt / operating income (pre-tax) | -0.31x (net cash) |
| Share count CAGR (buyback) | -1.2% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Texas Roadhouse fills its dining rooms in a way most casual chains cannot: first-quarter 2026 comparable restaurant sales rose 7.1% on 4.5% traffic growth, meaning real guests through the door rather than price increases, with average weekly sales of $174,151 per restaurant.
- The biggest swing factor is beef, its largest commodity, which the 10-K notes it buys on "prevailing market conditions resulting in unpredictable price volatility" (accession 0001104659-26-021292); management just lowered its 2026 commodity inflation outlook on easing beef costs, a direct tailwind to restaurant margins.
- The balance sheet is net cash and the company returned $313 million over the trailing year in dividends and buybacks; watch the next comparable-sales and beef-cost prints, since the price already embeds several years of high-teens operating growth.
Bull Case
The competitive advantage here is not a secret recipe; it is throughput. Texas Roadhouse runs some of the highest average unit volumes in casual dining, and it does it by filling seats rather than raising checks. First-quarter 2026 comparable sales rose 7.1% with 4.5% of that from traffic, a distinction that matters enormously: a chain growing on traffic is winning guests, while one growing only on price is borrowing from future demand. Average weekly sales reached $174,151 per restaurant. That volume advantage compounds through the model, because more guests over the same fixed rent and management structure is what produces the 27.6% return on equity the company earns despite a thin 7% net margin. The economics work through turns, not markup.
The growth runway remains long and self-funded. Texas Roadhouse operates two reportable segments, the flagship brand and Bubba's 33, and the 10-K describes store-week growth "driven by new restaurant openings and franchise acquisitions" (accession 0001104659-26-021292). New units keep opening, with a Bastrop, Texas location set for late July 2026 among them, and the company funds this expansion entirely from operating cash flow while holding net cash, no debt burden, and a balance sheet the framework scores clean. Capital allocation reinforces the story: $184.5 million in dividends and $128.5 million in buybacks over the trailing year, a dividend that has grown and still consumes under half of net income at a 46.8% payout, leaving room for both reinvestment and returns.
The near-term catalyst is a margin tailwind the company just flagged. Beef is the single largest input, and management lowered its 2026 commodity inflation outlook on improving beef-cost visibility. Because Roadhouse chose to hold pricing modest and win on traffic, easing input costs drop more cleanly to restaurant margin than they would for a chain that already stretched its pricing. First-quarter revenue grew 12.8% year over year to $1.63 billion with GAAP EPS of $1.87, ahead of consensus. The bull case is a traffic-driven, cash-generative operator with a proven unit model entering a period of falling input costs.
Bear Case
Start with the balance-sheet mechanics that the clean-compounder framing glosses over, because they define how little cushion sits under a premium multiple. Texas Roadhouse runs a current ratio of 0.46, meaning current liabilities are more than double the current assets. For a cash-register restaurant business this is normal and even efficient, since guests pay immediately while suppliers are paid later, so the company funds itself on negative working capital. But it also means there is no liquidity buffer: the model depends on the dining rooms staying full every week, and a sustained traffic slowdown would pressure a structure built for constant turnover. The company holds net cash, which offsets the concern, yet the Piotroski leverage reading is weak precisely because the business carries lease and payables obligations against thin liquid assets. This is a machine tuned for a steady state, and steady states in casual dining do not last forever.
The margin structure is the deeper vulnerability. Texas Roadhouse earns only about a 7% net margin, so its profitability depends heavily on two volatile inputs it does not control: beef and labor. The 10-K is explicit that if commodity increases are of significant "duration and we choose not to pass on the cost increases, our short-term results could be negatively affected", and that even when it does raise prices, there is "no assurance that we will realize the full benefit of any adjustment due to changes in our guests' menu item selections and guest traffic" (accession 0001104659-26-021292). Beef prices have eased recently, which is the current tailwind, but the same volatility cuts the other way, and the company's whole brand promise of value pricing limits how much it can pass through when costs turn back up. A 7% margin leaves little room for a bad beef year.
The valuation then asks for a lot from a mature casual-dining chain. At about 25 times operating income, the price embeds operating growth of roughly 19.2% a year for five years; historically only about 38% of comparable fast-growers sustained even that pace over five years, and Roadhouse is a Mature-stage operator, not an early growth story. The asset-value and earnings-power methods read the price at 2.9 and 4.4 times what they support; only the peer-multiple and forward-growth lenses reach it, with the stock at 29.5 times earnings against a restaurant-sector median of 28, essentially priced at the top of its own peer set. That leaves no margin for a consumer pullback, a beef-cost reversal, or the traffic growth simply normalizing toward the low single digits typical of mature chains. The bear case is not that the business is weak; it is that a value-priced steakhouse earning 7% margins is priced for high-teens compounding it can only deliver if traffic and beef both keep cooperating.
Valuation
At $189.48 (July 11, 2026), Texas Roadhouse trades at about 25 times company-wide operating income, which embeds operating growth of roughly 19.2% a year for five years. The rate is within what the company has recently delivered, so the framework labels the assumption within range, but it is demanding for a Mature-stage chain: only about 38% of comparable fast-growers held that pace even five years. Notably, the price requires no margin improvement, it leans on growth and longevity rather than on the business becoming more profitable per dollar, since the implied steady-state operating margin the price needs sits below the roughly 8% the company already earns. The whole bet is that the traffic-and-unit growth persists, not that the economics per restaurant get better.
The method families split along a clean line. The peer-multiple and forward-growth lenses reach the price: at 29.5 times trailing earnings against a restaurant-sector median of 28, and 19 times EV/EBITDA against an 18 median, Roadhouse is priced right at its peer set, not above it. The asset-value and earnings-power methods, which credit only tangible capital and steady-state profit, land well below, at 2.9 and 4.4 times the price, because a company earning a 7% net margin on a modest asset base looks expensive to methods that ignore growth. That spread is the durability premium: the market is paying for continued high-return unit expansion the static methods cannot frame. The filing-sourced structure underneath is the two-segment model, the flagship brand and Bubba's 33 as reportable segments (accession 0001104659-26-021292), with store-week growth driven by new openings and franchise acquisitions (same accession).
Solvency removes the tail risk from the growth bet: the balance sheet is net cash, so there is no financial pressure on the path to the priced-in outcome, and free cash flow of $360.6 million converts at 85% of net income. The current ratio of 0.46 looks alarming out of context but is the normal signature of a cash-paying restaurant funded on negative working capital, not a distress signal. One number to state on its correct basis: the common dividend is $3.00 per share annualized, a 1.6% yield at a 46.8% payout, comfortably covered. What the buyer at $189.48 is underwriting is that a value-priced steakhouse keeps winning traffic and opening profitable units for years, at a price that its restaurant peers roughly share but that its own asset base and steady-state earnings do not independently justify. The easing beef cycle is the near-term reason the market is comfortable siding with the growth lens.
Catalysts
The early-May first-quarter report was a beat with the right internal mix. Revenue rose 12.8% year over year to $1.63 billion, GAAP EPS of $1.87 came in about 4.5% above consensus, and comparable restaurant sales grew 7.1% including 4.5% traffic growth, with average weekly sales of $174,151. The traffic component is the tell that the growth is demand rather than pricing. The more forward-looking item was the commodity outlook: management lowered its 2026 commodity inflation guidance, attributing it primarily to shifting beef-market dynamics and better cost visibility, which sets up margin recovery as the near-term catalyst.
The rest of the calendar is the steady cadence of a unit-growth operator. New restaurants keep opening, including a Bastrop, Texas location targeted for late July 2026, and the summer Rib Fest promotion is running at participating locations. One minor operating item to note is a California allergen-disclosure regulation taking effect July 1, 2026 that requires menu changes at chains including Texas Roadhouse, a compliance cost rather than a demand event. The next quarterly report is the checkpoint that matters: whether traffic growth holds mid-single-digit, and whether easing beef costs convert into the restaurant-margin recovery management has signaled. Those two lines, traffic and beef, are what determine whether the high-teens growth the price assumes stays plausible.
Peer Cohorts (Per Segment, With Filing Citations)
Texas Roadhouse (reported)
- DRI (DARDEN RESTAURANTS, INC.)
- (no filing in the citation store)
- EAT (BRINKER INTERNATIONAL, INC.)
- (no filing in the citation store)
- CAKE (THE CHEESECAKE FACTORY INCORPORATED)
- (no filing in the citation store)
Bubba's 33 (reported)
- EAT (BRINKER INTERNATIONAL, INC.)
- (no filing in the citation store)
- DRI (DARDEN RESTAURANTS, INC.)
- (no filing in the citation store)
- CAKE (THE CHEESECAKE FACTORY INCORPORATED)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings release, May 2026 · local development coverage, June 2026 · Q1 2026 earnings call, May 2026 · regulatory coverage, June 2026