Texas Roadhouse operates its restaurants primarily under the Texas Roadhouse name, offering an assortment of seasoned and aged steaks. The company was founded in 1993 and is based in Louisville, Kentucky.
TXRH Price Forecast Based on DCF Valuation
DCF Fair Value Target:
Below please find a table outlining a discounted cash flow forecast for TXRH, in which we model out valuation assuming a variety of terminal growth rates. To summarize, we found that Texas Roadhouse Inc ranked in the 13th percentile in terms of potential gain offered. We should note, though, that all scenearios modelled for this stock suggest it is overvalued. The most interesting components of our discounted cash flow analysis for Texas Roadhouse Inc ended up being:
TXRH's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 17%; for context, that number is higher than 74.77% of tickers in our DCF set.
Texas Roadhouse Inc's interest coverage rate -- a measure of gross earnings relative to interest payments -- comes in at -232.62. This coverage rate is greater than that of merely 0.76% of stocks we're observing for the purpose of forecasting via discounted cash flows.
Relative to other stocks in its sector (Consumer Cyclical), Texas Roadhouse Inc has a reliance on debt greater than just 16.18% of them.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
Want more companies with a valuation profile/forecast similar to that of Texas Roadhouse Inc? See CARS, CHUY, PZZA, RUBI, and CBRL.
Restaurant stocks have been whipsawed by poor earnings, Covid-19 warnings from health experts, and hopes about reopenings and vaccine progress. Analyst Brian Vaccaro notes that restaurants’ ability to raise capital in recent weeks has bolstered balance sheets, in many cases pushing off any concerns about liquidity to a year or more. “While risks obviously remain, for investors seeking tactical long ideas in an environment of improving weekly sales data as more states reopen (and capacity limits are raised),” there are still restaurant stocks worth buying, he writes.
In this episode of Industry Focus: Consumer, Emily Flippen and Motley Fool contributor Dan Kline discuss retail bankruptcies and how coronavirus is affecting retail businesses. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center.
The restaurant industry may be fundamentally changed by the coronavirus pandemic, but even with the ability to utilize takeout and delivery options to remain open when other businesses were forced closed, some chains may not survive. Shake Shack, for example, announced it will be punching holes in the sides of its burger shops to allow for drive-thru and walk-up orders, as they believe social distancing will be the norm for a long time to come. Olive Garden owner Darden Restaurants (NYSE: DRI) could have been done in by the pandemic, but, having built out a substantial off-premises business before the crisis struck, it has been able to offset much of the loss from customers no longer coming to sit down and eat.