Texas Roadhouse
TXRH
$168.23
+0.41%
Texas Roadhouse, Inc. is a prominent operator in the casual dining restaurant industry, known for its moderately priced, full-service steakhouse concept offering steaks, ribs, seafood, and other American fare. The company has established itself as a market leader through its consistent execution, strong value proposition, and a culture focused on hospitality, which has driven industry-leading customer traffic and unit-level economics. The current investor narrative centers on the stock's significant underperformance relative to the broader market, as the casual dining sector faces shifting consumer patterns and intense competition, with recent news highlighting a broader rotation within restaurant stocks as diners seek value, placing Texas Roadhouse's core strengths and traffic trends under scrutiny.…
TXRH
Texas Roadhouse
$168.23
Related headlines
Investment Opinion: Should I buy TXRH Today?
Rating & Thesis: Hold. Texas Roadhouse is a high-quality operator caught in a sector slowdown, making its premium valuation difficult to justify until growth re-accelerates or the multiple compresses further. The lack of a clear analyst consensus price target underscores the current uncertainty.
Supporting Evidence: The stock trades at a forward PE of 21.95x, which is a discount to its trailing multiple of 27.38x but remains elevated versus industry averages. Revenue growth has decelerated to 3.07% YoY, profitability is compressing (Q4 net margin of 5.71%), but free cash flow generation remains exceptionally strong at $730.1 million TTM. The technical picture is weak, with the stock down 10.06% over the past year and trading just 8.7% above its 52-week low.
Risks & Conditions: The two biggest risks are further revenue deceleration below 3% and sustained margin compression eroding the forward earnings estimates. This Hold rating would upgrade to a Buy if the forward PE compresses below 20x (aligning closer with sector peers) or if quarterly revenue growth re-accelerates above 5% with stable margins. It would downgrade to a Sell if revenue turns negative or the stock breaks decisively below its 52-week low of $153.83. The stock is currently overvalued relative to its near-term growth prospects and sector comparables.
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TXRH 12-Month Price Forecast
The AI assessment is Neutral with Medium confidence. Texas Roadhouse possesses superior unit economics and cash generation, but these strengths are currently overshadowed by decelerating growth and a premium valuation in a challenging sector. The base case (55% probability) of range-bound trading is most likely, as the stock needs time for either fundamentals to improve or the multiple to compress to a more attractive level. The stance would upgrade to Bullish on evidence of sustained traffic and sales re-acceleration (e.g., two consecutive quarters of >4% revenue growth). It would downgrade to Bearish on a breakdown below $153.83 or a negative turn in quarterly comparable sales.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Texas Roadhouse's 12-month outlook, with a consensus price target around $218.70 and implied upside of +30.0% versus the current price.
Average Target
$218.70
4 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
4
covering this stock
Price Range
$135 - $219
Analyst target range
Analyst coverage is limited, with only 4 analysts providing estimates, indicating this is a less-followed name among institutional investors which can contribute to higher volatility. The available analyst data focuses on forward estimates, with an average EPS forecast of $10.94 and average revenue forecast of $9.11 billion for the coming period, but a consensus price target and explicit Buy/Hold/Sell distribution are not provided in the data, making it impossible to calculate implied upside or characterize the overall sentiment. Without explicit price targets, the range of analyst expectations cannot be quantified; however, the recent institutional ratings show a mix of views, including an upgrade to 'Outperform' from Mizuho and a downgrade to 'Hold' from Truist Securities in February 2026, alongside maintained 'Neutral' or 'Overweight' ratings from others, signaling moderate uncertainty and a lack of strong directional conviction among the covering firms.
Bulls vs Bears: TXRH Investment Factors
The investment debate for Texas Roadhouse centers on a clash between deteriorating near-term fundamentals and a potentially oversold valuation for a high-quality operator. The bear side currently holds stronger evidence, driven by concrete data points: revenue growth has decelerated sharply to 3.07%, margins are compressing quarterly, and the stock trades at a premium 27.38x trailing PE despite a 10% annual decline. The most critical tension is whether the company's industry-leading unit economics and strong free cash flow generation ($730.1M TTM) can overcome the clear slowdown in top-line growth and justify its elevated valuation multiple. The resolution of this growth-versus-valuation puzzle will determine the stock's direction.
Bullish
- Strong Free Cash Flow Generation: The company generated $730.1 million in free cash flow over the trailing twelve months, providing significant internal funding for growth initiatives and shareholder returns. This robust cash generation supports a healthy balance sheet and underpins the company's financial resilience.
- Industry-Leading Profitability Metrics: Texas Roadhouse maintains a high return on equity of 27.76% and an operating margin of 8.55%, which are healthy for the casual dining sector. These metrics demonstrate superior unit-level economics and efficient capital allocation compared to many peers.
- Valuation Compression from Recent Decline: The stock is trading near its 52-week low, just 14.0 points above $153.83, placing it in the lower 8.7% of its yearly range. This deep oversold condition, combined with a forward PE of 21.95x, presents a potential value entry point relative to its own historical valuation.
- Sector Tailwinds from Value Rotation: Recent news indicates a consumer shift towards value-priced sit-down restaurants, a trend that benefits Texas Roadhouse's core value proposition. As diners move away from inflated fast-food options, the company's moderately priced, full-service model is well-positioned to capture traffic.
Bearish
- Severe Revenue Growth Deceleration: Q4 2025 revenue grew only 3.07% year-over-year to $1.48 billion, a sharp slowdown from prior quarters. This single-digit growth signals a normalization of post-pandemic demand and raises concerns about the company's ability to sustain its historical growth trajectory in a competitive market.
- Elevated Valuation Despite Weak Performance: The stock's trailing PE of 27.38x is significantly above typical restaurant industry averages in the low-20s and sits above its own historical range. This premium valuation leaves little margin for error, especially given the stock's 10.06% decline over the past year and severe -32.92% relative strength deficit versus the S&P 500.
- Recent Profitability and Margin Compression: The Q4 2025 net margin of 5.71% and gross margin of 10.7% are notably lower than the TTM figures of 6.9% and 12.4%, respectively. This quarterly compression, from a Q2 2025 net margin of 8.21%, indicates rising cost pressures or unfavorable sales mix that could threaten earnings.
- Lack of Clear Analyst Conviction: With only 4 analysts providing coverage and a mix of recent rating changes (including an upgrade to 'Outperform' and a downgrade to 'Hold'), there is no strong consensus or price target to anchor investor expectations. This limited coverage can contribute to higher volatility and uncertainty.
TXRH Technical Analysis
The stock is in a pronounced downtrend, having declined 10.06% over the past year, which starkly contrasts with the S&P 500's 22.86% gain, resulting in a severe relative strength deficit of -32.92%. Currently trading at $167.86, the price sits just 14.0 points above its 52-week low of $153.83, positioning it in the lower 8.7% of its 52-week range ($153.83 to $197.00), indicating deep oversold conditions that may present a value opportunity but also reflect significant negative momentum and bearish sentiment. Recent momentum remains weak, with the stock down 6.38% over the past month and 1.40% over the past three months, continuing the longer-term downtrend; this persistent selling pressure, despite a beta of 0.808 indicating lower volatility than the market, suggests the stock is facing company or sector-specific headwinds rather than broad market weakness. Key technical levels are clearly defined, with immediate support at the 52-week low of $153.83 and major resistance at the 52-week high of $197.00; a decisive breakdown below $153.83 would signal a potential acceleration of the downtrend, while a sustained move above the recent high near $194.49 would be necessary to suggest a trend reversal, though the stock's low beta implies any recovery may be more gradual than the broader market's moves.
Beta
0.81
0.81x market volatility
Max Drawdown
-22.0%
Largest decline past year
52-Week Range
$154-$197
Price range past year
Annual Return
-12.8%
Cumulative gain past year
| Period | TXRH Return | S&P 500 |
|---|---|---|
| 1m | -5.5% | +1.5% |
| 3m | -0.2% | +13.4% |
| 6m | -3.5% | +10.9% |
| 1y | -12.8% | +24.5% |
| ytd | -1.8% | +10.0% |
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TXRH Fundamental Analysis
Revenue growth has decelerated, with the most recent quarterly revenue of $1.48 billion representing a modest 3.07% year-over-year increase; this single-digit growth is a slowdown from the stronger double-digit increases seen in prior quarters of 2025 (e.g., Q2 revenue was $1.51 billion), indicating a normalization of post-pandemic demand and potential pressure from consumer spending shifts within the casual dining segment. The company remains solidly profitable, posting net income of $84.6 million in Q4 2025 with a net margin of 5.71%, but profitability has compressed from higher levels earlier in the year, such as the Q2 2025 net margin of 8.21%; the quarterly gross margin of 10.7% is notably lower than the trailing twelve-month figure of 12.4%, suggesting recent cost pressures or sales mix challenges, though the operating margin of 8.55% remains healthy for the industry. The balance sheet shows a debt-to-equity ratio of 1.29, indicating a leveraged but manageable capital structure, while strong cash generation is evident with free cash flow of $730.1 million over the trailing twelve months and a robust return on equity of 27.76%; this substantial free cash flow, coupled with a current ratio of 0.50, suggests the company has ample internal funding for growth and shareholder returns but limited short-term liquidity, which is typical for capital-intensive restaurant businesses.
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 the company's consistent profitability, the primary valuation metric selected is the Price-to-Earnings (PE) ratio. The stock trades at a trailing PE of 27.38x and a forward PE of 21.95x, with the forward multiple's discount to the trailing figure implying the market expects earnings growth to continue, albeit at a potentially slower pace than historically. Compared to sector averages, the valuation appears elevated; for instance, the trailing PE of 27.38x is significantly above typical restaurant industry averages in the low-20s, representing a premium that must be justified by Texas Roadhouse's superior brand strength, industry-leading unit economics, and consistent market share gains. Historically, the current trailing PE of 27.38x sits above the stock's own multi-year range, which has often fluctuated between the high-teens and mid-20s (e.g., 22.25x in Q1 2023 and 25.97x in Q4 2024), suggesting the market is still pricing in optimistic long-term expectations despite the recent price decline, leaving little margin for error if fundamentals deteriorate further.
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
Financial & Operational Risks: Texas Roadhouse faces significant financial risks from its decelerating revenue growth, which slowed to 3.07% YoY in Q4 2025, and compressed profitability, with quarterly gross margin falling to 10.7% from a TTM level of 12.4%. The company carries a debt-to-equity ratio of 1.29, indicating a leveraged capital structure that could pressure finances if earnings decline further. While free cash flow of $730.1 million is robust, the low current ratio of 0.50 highlights limited short-term liquidity, which is a typical but notable risk for capital-intensive restaurant expansion.
Market & Competitive Risks: The primary market risk is valuation compression, as the stock's trailing PE of 27.38x trades at a premium to both sector peers and its own historical range. The casual dining sector is experiencing intense competition and shifting consumer patterns, as noted in recent news of a traffic-driven rotation within restaurant stocks. The stock's beta of 0.808 suggests it is less volatile than the market, but its severe -32.92% relative strength underperformance over the past year indicates company or sector-specific headwinds that are not abating with broader market gains.
Worst-Case Scenario: The worst-case scenario involves a continuation of the current downtrend, where decelerating revenue growth and margin pressure lead to consecutive earnings misses, triggering multiple analyst downgrades. This could result in a full valuation de-rating towards sector-average multiples. A realistic downside would be a retest and breakdown below the key 52-week low support of $153.83. From the current price of $167.86, this represents a potential loss of approximately -8.4%. A more severe bear case, factoring in the stock's maximum drawdown of -21.98%, could see losses extending towards the $131-$140 range if sector sentiment deteriorates further.
FAQ
The key risks are, in order of severity: 1) Growth Deceleration Risk: Revenue growth has slowed to 3.07% YoY, and further slowdown could trigger multiple compression. 2) Valuation Risk: The high PE ratio of 27.38x is vulnerable to de-rating if earnings disappoint. 3) Margin Compression Risk: Quarterly gross margin fell to 10.7%, indicating rising costs that could pressure profitability. 4) Sector & Competitive Risk: The casual dining sector is highly competitive, with consumer spending patterns shifting, as noted in recent news of a traffic-driven rotation.
The 12-month forecast presents three scenarios. The Base Case (55% probability) sees the stock trading between $168 and $180, as low-single-digit growth persists and the valuation slowly compresses. The Bull Case (25% probability) targets a return to the $194-$197 range, driven by re-accelerating growth and stable margins. The Bear Case (20% probability) risks a decline to the $154-$160 range if fundamentals worsen and support breaks. The base case is most likely, implying limited near-term upside from the current price of $167.86 without a fundamental catalyst.
TXRH stock is overvalued relative to its near-term growth prospects and sector peers. The trailing PE of 27.38x is significantly above typical restaurant industry averages in the low-20s. Although the forward PE of 21.95x implies some discount for expected growth, it remains a premium for a company with single-digit revenue growth. The valuation implies the market still expects a return to stronger historical performance, leaving little room for disappointment. Technically, the stock is oversold, but fundamentally, it carries a rich multiple.
TXRH is not a compelling buy at current levels for most investors, warranting a Hold rating. While the stock is deeply oversold (trading just 8.7% above its 52-week low) and the company generates exceptional free cash flow ($730.1M TTM), its premium valuation (27.38x trailing PE) is difficult to justify given sharply decelerating revenue growth of 3.07%. It could be a good buy for very patient, value-oriented investors if the price falls further, bringing the forward PE below 20x, or if clear evidence emerges that growth is re-accelerating.
TXRH is more suitable for a long-term investment horizon of 3+ years. The stock's low beta of 0.808 indicates lower volatility than the market, which is not ideal for short-term trading, especially amidst its current downtrend and lack of near-term catalysts. Long-term investors can benefit from the company's durable brand, strong cash flow, and potential for eventual operational turnaround and multiple expansion. Given the current growth uncertainties, a short-term trade is highly speculative. A minimum holding period of 12-18 months is suggested to allow time for the investment thesis to play out.
