Texas Roadhouse, Inc. (TXRH): what the price assumes

In the published model solve dated 2026-Q2, anchored at $198.99, Texas Roadhouse, Inc. (TXRH) is priced for +22.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/TXRH

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 10: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.5% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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.

Families that justify the price: 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=12)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

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.)
• FY2025 10-K: …Cheddar's Scratch Kitchen, Chuy's, Yard House, Bahama Breeze, Seasons 52, The Capital Burger and ongoing royalties and other fees from our franchise operations and contractually managed locations). External sales are derived principally from food and beverage sales, we do not rely on any major customers as a source…
• FY2025 10-K: …in an atmosphere inspired by the American West. LongHorn Steakhouse opened its first restaurant in 1981, and we acquired LongHorn Steakhouse in October 2007 as part of the RARE Hospitality International, Inc. (RARE) acquisition. LongHorn Steakhouse restaurants feature a variety of menu items including signature fresh…
• EAT (BRINKER INTERNATIONAL, INC.)
• FY2025 10-K: …the Internal Revenue Service: Compliance Assurance Process (CAP) program. Our federal returns for fiscal 2025 to fiscal 2026 are under examination through the Internal Revenue Service: Bridge Plus program. There are no unrecorded liabilities associated with these examinations. 10. SHAREHOLDERS' EQUITY Share…
• FY2025 10-K: 5, we had $ 5.8 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next 9 months. Cybersecurity Litigation In fiscal 2018, we discovered malware at certain Chili's restaurants that may have resulted in unauthorized access or acquisition of customer payment…
• CAKE (THE CHEESECAKE FACTORY INCORPORATED)
• FY2025 10-K: …cake:FourthAmendmentMember cake:OneMonthTermSecuredOvernightFinancingRateMember 2025-01-01 2025-12-30 0000887596 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2025-01-01 2025-12-30 0000887596 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember cake:FourthAmendmentMember 2025-01-01…
• FY2025 10-K: …2024, we recorded impairment of assets and lease terminations expense of $13.6 million primarily related to impairment of long-lived assets for one The Cheesecake Factory (previously partially impaired) and six Other FRC locations (one previously partially impaired), partially offset by lease termination income, net…

Bubba's 33 (reported)

• EAT (BRINKER INTERNATIONAL, INC.)
• FY2025 10-K: …with new environmental, sustainability requirements; our pursuit of or failure to achieve any goals, targets or objectives with respect to sustainability matters; adverse weather conditions; terrorist acts; cybersecurity, artificial intelligence and phishing threats; health epidemics or pandemics; tax reform;…
• FY2025 10-K: …of transferable liquor licenses are based on prices in the open market for licenses in the same or similar jurisdictions and are categorized as Level 2. We record an impairment charge for the excess of the carrying amount over the fair value. 54 Table of Contents Footnote Index During fiscal 2025 and fiscal 2024 we…
• DRI (DARDEN RESTAURANTS, INC.)
• FY2025 10-K: …culinary innovation, attentive service, and engaging atmosphere enabled by our people. Darden enables each brand to reach its full potential by leveraging its scale, insights, and experience in a way that protects uniqueness and competitive advantages. Additionally, our brands can capitalize on data driven insights…
• FY2025 10-K: …Cheddar's Scratch Kitchen, Chuy's, Yard House, Bahama Breeze, Seasons 52, The Capital Burger and ongoing royalties and other fees from our franchise operations and contractually managed locations). External sales are derived principally from food and beverage sales, we do not rely on any major customers as a source…
• CAKE (THE CHEESECAKE FACTORY INCORPORATED)
• FY2025 10-K: …tax positions (3) ​ ​ 0.04 ​ ​ - Tax effect of adjustments (4) ​ (0.24) ​ ​ (0.09) Adjusted diluted net income per common share (5) ​ $ 3.77 ​ $ 3.44 (1) Represents gift card breakage revenue of $17.3 million as a result of a change in historical redemption patterns, partially offset by a non-recurring $7.9 million…
• FY2025 10-K: ​ 2023 Operating ​ $ 168,504 ​ $ 154,233 ​ $ 145,774 Variable ​ ​ 92,798 ​ ​ 90,686 ​ 87,047 Short-term ​ ​ 157 ​ ​ 158 ​ 142 Total ​ $ 261,459 ​ $ 245,077 ​ $ 232,963 ​ Supplemental disclosures of cash flow information related to leases were as follows: (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ ​ 2025…

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.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• 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.