| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 54.80 | -67 |
| Intrinsic value (DCF) | 643.19 | 286 |
| Graham-Dodd Method | 13.69 | -92 |
| Graham Formula | 152.22 | -9 |
Texas Roadhouse, Inc. (NASDAQ: TXRH) is a leading casual dining restaurant chain specializing in hand-cut steaks, fall-off-the-bone ribs, and made-from-scratch sides. Founded in 1993 and headquartered in Louisville, Kentucky, the company operates and franchises restaurants under the Texas Roadhouse, Bubba's 33, and Jaggers brands. With 566 domestic and 101 international franchise locations as of December 2021, Texas Roadhouse has established itself as a dominant player in the competitive casual dining sector. The company's commitment to high-quality food, value pricing, and a lively atmosphere has driven consistent growth and customer loyalty. Texas Roadhouse's business model emphasizes company-owned locations (83% of total units) for greater control over operations and customer experience, while franchising supports international expansion. The company's strong unit economics, disciplined growth strategy, and focus on operational efficiency position it well in the $300+ billion U.S. restaurant industry. With its value-oriented positioning and steakhouse focus, Texas Roadhouse competes effectively in the casual dining segment against both traditional steakhouse chains and broader casual dining concepts.
Texas Roadhouse presents an attractive investment opportunity due to its consistent revenue growth (FY2023 revenue: $5.37B), strong profitability (net income: $433.6M), and industry-leading unit economics. The company's 0.88 beta suggests lower volatility than the broader market, while its $2.51 dividend provides income potential. Key strengths include a loyal customer base, efficient operations with industry-leading labor productivity, and a disciplined growth strategy targeting 25-30 new company-owned restaurants annually. Risks include exposure to commodity price fluctuations (particularly beef), labor cost pressures, and potential consumer pullback in discretionary spending. The company's moderate debt level ($854M) and healthy cash position ($245M) provide financial flexibility. With a market cap of $12.6B and P/E ratio of ~29 (based on $6.47 EPS), valuation appears full but justified by the company's growth prospects and operational excellence in the competitive casual dining space.
Texas Roadhouse maintains a strong competitive position in the casual dining segment through several key advantages. Its steak-focused menu differentiates it from broader casual dining chains while remaining more accessible than premium steakhouse concepts. The company's 'Legendary Food, Legendary Service' value proposition combines quality (hand-cut steaks, fresh ingredients) with affordability (average check ~$20), creating a compelling value equation. Operationally, Texas Roadhouse benefits from industry-leading labor productivity (sales per labor hour ~20% above peers) and efficient kitchen layouts that support high throughput. The company's unit growth strategy focuses on underserved markets with lower competition, supporting strong new unit performance (average unit volumes ~$5.8M). While not heavily franchised (15% of units), the company maintains strict quality controls that protect brand consistency. Texas Roadhouse's marketing strategy emphasizes local store marketing and word-of-mouth rather than heavy national advertising, contributing to higher margins. The company faces competition from both steakhouse specialists (LongHorn Steakhouse, Outback) and broader casual dining chains (Olive Garden, Chili's), but its combination of food quality, value pricing, and operational efficiency creates a defensible position. The 2019 launch of Bubba's 33 provides growth potential in the sports bar segment while leveraging existing operational capabilities.