Q4 earnings miss and share reaction
Texas Roadhouse (TXRH) recently reported a softer fourth quarter, with revenue, EBITDA and EPS all coming in below analyst expectations. The stock has slipped about 7% since the results.
See our latest analysis for Texas Roadhouse.
After the initial 7% pullback on the Q4 miss, the short term trend has softened. The 30 day share price return is 8.17% and the 90 day share price return is 2.36%, while the 5 year total shareholder return of 94.62% points to a stronger longer term record.
If earnings volatility has you reassessing restaurant stocks, it can be helpful to see what else the market is rewarding right now by scanning 20 top founder-led companies
With Texas Roadhouse shares giving back some ground after the Q4 miss but still carrying a US$11.1b market value, the key question is whether recent weakness offers a reasonable entry or if the market is already factoring in future growth.
Most Popular Narrative: 13% Undervalued
Texas Roadhouse's most followed narrative pegs fair value at about $196.85 per share, compared with a last close of $171.63, framing the current pullback against a higher long term earnings story.
Expansion of Bubba's 33 and Jaggers brands, with a sizable pipeline of openings planned and a proven infrastructure/leadership team, supports sustained unit growth and future revenue acceleration as new stores mature. Successful digital integration, enhancements to the mobile app, improved waitlist/to-go experience, and broad rollout of digital kitchen technology, are boosting operational efficiency and guest convenience, which is likely to drive both sales growth and margin improvement.
Curious what kind of revenue climb and margin profile need to line up to support that higher fair value, and how long that cash flow ramp is modeled to last.
Result: Fair Value of $196.85 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, you still need to weigh ongoing beef cost inflation and rising wage pressure, which could squeeze margins and challenge the higher earnings path implied in this outlook.
Find out about the key risks to this Texas Roadhouse narrative.
Another View: Market Multiple Sends a Different Signal
The DCF work points to value upside, but the current P/E of 27.9x tells a more cautious story. It sits well above the US Hospitality average of 21.1x and above the fair ratio of 24.2x. This suggests investors are already paying a premium that could limit how much rerating is left. Is that premium something you are comfortable underwriting?
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
The mix of optimism and concern in this article is deliberate, and it is worth acting while the details are fresh in your mind so you can weigh both sides using the 2 key rewards and 2 important warning signs
Ready to find your next idea?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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