Last Update24 Oct 25Fair value Decreased 0.19%
Analysts have slightly revised their price target for Texas Roadhouse, increasing it by $5 to $210. They cite ongoing solid traffic and generally stable demand. However, some note softer trends in September and raise questions about profit margins given higher beef costs.
Analyst Commentary
As Texas Roadhouse navigates shifting market conditions, analysts offer a range of insights reflecting both optimism and caution regarding the company's valuation and operational strategies.
Bullish Takeaways
- Bullish analysts point to consistent customer traffic, even amidst varying demand across the restaurant sector. This is seen as a sign of resilient brand appeal and operational strength.
- Recent price target increases indicate confidence in Texas Roadhouse’s ability to maintain stable sales and execute well, particularly in contrast to some weakness observed in competitors.
- Overall demand has held up at a high level for recent quarters, supporting the view that the company is positioned for continued growth despite sector headwinds.
- The decision to keep an Overweight rating suggests that further upside could be realized as the company leverages its steady customer base and navigates industry fluctuations.
Bearish Takeaways
- Bearish analysts highlight a visible slowdown in demand during September, raising concerns about potential volatility in future quarters.
- Profit margins remain under scrutiny, as persistent high beef costs may pressure earnings. This is particularly relevant given management’s reluctance to fully pass these costs onto consumers.
- Comparisons with fast casual and quick service peers reveal relative weakness in some areas, suggesting execution risks if broader traffic trends soften.
- Some caution that valuation may be running ahead of near-term profit expansion unless cost challenges are addressed more aggressively.
What's in the News
- Texas Roadhouse reiterated its 2025 earnings guidance, citing expectations for positive comparable restaurant sales growth. Benefits are anticipated from menu pricing adjustments and approximately 5% store week growth (Key Developments).
- Between April 2, 2025 and July 1, 2025, the company repurchased 61,698 shares for $9.85 million. This completed buybacks totaling 175,983 shares and $30 million under its February 2025 authorization (Key Developments).
Valuation Changes
- The fair value estimate has decreased slightly, moving from $196.71 to $196.33 per share.
- The discount rate has edged down modestly, from 8.51% to 8.49%.
- Revenue growth expectations have risen, increasing from 8.91% to 9.50%.
- The net profit margin has seen a minor decline, dropping from 8.34% to 8.26%.
- The future P/E ratio has decreased incrementally, from 26.74x to 26.51x.
Key Takeaways
- Expansion of secondary brands and digital improvements are driving unit growth, efficiency, and enhanced customer experience to support future sales and margin gains.
- Strong brand presence in growing suburban markets, combined with cost management strategies, positions the company for sustained revenue and earnings growth above industry trends.
- Persistent cost pressures from beef inflation, declining alcohol sales, digital lag, and wage increases could undermine margins, revenue growth, and long-term competitive position.
Catalysts
About Texas Roadhouse- Operates casual dining restaurants in the United States and internationally.
- 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.
- Steady guest traffic increases, high guest satisfaction scores, and a strong value-for-money perception position the company to capitalize on ongoing growth in consumer discretionary spending and the preference for experiential dining, supporting robust same-store sales and top-line performance.
- Continued population growth and suburbanization in markets where Texas Roadhouse has a strong brand presence is increasing the company's addressable market and potential for above-industry-average same-store sales and revenue growth.
- Ongoing supply chain optimization, cost control focus, and leveraging scale for better input pricing provide margin expansion opportunities, helping offset commodity and wage inflation and supporting long-term earnings growth.
Texas Roadhouse Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Texas Roadhouse's revenue will grow by 9.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.7% today to 8.1% in 3 years time.
- Analysts expect earnings to reach $594.2 million (and earnings per share of $8.94) by about September 2028, up from $438.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $529.4 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.7x on those 2028 earnings, up from 25.5x today. This future PE is greater than the current PE for the US Hospitality industry at 23.9x.
- Analysts expect the number of shares outstanding to decline by 0.39% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.59%, as per the Simply Wall St company report.
Texas Roadhouse Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Elevated and persistent beef inflation-exacerbated by tight supply and high retail demand-continues to pressure food and beverage costs (notably 5.2% commodity inflation in Q2 with projections of up to 7% for Q3 and sustained high levels in Q4), which reduces restaurant margins and may constrain net earnings growth if not offset by further price increases or sustained traffic.
- Negative mix pressure driven by declining alcohol sales (a multi-year secular trend), partially offset by modest gains in mocktails and entrees, could undermine average check growth and dampen comparable sales, impacting revenue expansion and margin resilience long-term.
- Heavy reliance on in-person dining and limited momentum in delivery channel innovation-particularly at core Texas Roadhouse units, with management explicitly resisting broader delivery rollout-risks missing out on the secular consumer shift toward convenience and the "homebody" economy, potentially affecting future market share and top-line revenue growth.
- Slow or limited digital adoption in core brands (beyond mobile app usage for To-Go and waitlist) may disadvantage Texas Roadhouse against competitors that more fully integrate technology for guest loyalty and operational efficiency, undermining throughput improvement and margin expansion opportunities.
- Exposure to rising wage inflation (guided at 4% for 2025 with labor as a percentage of sales at 32.9% for Q2) and regulatory risk (such as increased minimum wage laws, health care mandates, or state-specific legislation), coupled with ongoing unit development and higher capital expenditure requirements, could compress net margins and constrain free cash flow available for shareholder returns or reinvestment.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $197.609 for Texas Roadhouse based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $227.0, and the most bearish reporting a price target of just $170.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.4 billion, earnings will come to $594.2 million, and it would be trading on a PE ratio of 27.7x, assuming you use a discount rate of 8.6%.
- Given the current share price of $168.12, the analyst price target of $197.61 is 14.9% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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