What to Expect from Texas Roadhouse Stock Post-Earnings

The key to getting the right price on TXRH lies in the price-earnings ratios

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Texas Roadhouse, Inc. (NASDAQ:TXRH) is an American restaurant chain specializing in steaks and American cuisine. The company has locations in several Middle Eastern and Asian countries, as well as the U.S. and Mexico. TXRH is up almost 20% year-to-date ahead of its expected earnings report today after the close. As Election Day uncertainty and COVID-19 fears continue to shake up the market, many restaurant stocks will be looking stand out from the rest. TXRH is only a few days removed from its Oct. 20 all-time high of $76.10, a marker that signals a triple bounce off its March 18 six-year bottom near $25.

Texas Roadhouse has a market cap of $4.82 billion and a book value of $12.51 per share. Its price-to-book ratio stands at 6.04. The company has a trailing price-earnings ratio of 84.83 and a forward price-earnings ratio of 31.45. The current price-earnings ratio is 78.18.

Texas Roadhouse has beat expectations on three of the most recent four earnings reports. In the most recent quarter, the company beat their target by $0.15. In the first quarter of 2020, Texas Roadhouse missed expectations by a pretty significant margin of $0.35 in EPS. For the upcoming earnings report today, Texas Roadhouse is expected to report an EPS of $0.18, which would signal a shift back into profitability. The company has a current trailing 12-month EPS of $0.89.

Texas Roadhouse grew its revenue annually from 2016 to 2019 by more than $200 million. The company managed an approximate 11% growth in revenue over this period In 2019, Texas Roadhouse increased revenue by nearly $300 million, making it one of the company’s best years in terms of revenue in recent times. Over the past 12 months, the company has reported a combined revenue of $2.51 billion, which is $250 million less than the $2.77 billion produced in 2019.

Texas Roadhouse posted a steady increase in net income between 2016 and 2019, as well. During this time period, the company reported a more than 50% increase in net income. Texas Roadhouse averaged a net income increase of about $15 million per year, with the exception of 2018. In 2018, the company increased net income by more than $26 million. Texas Roadhouse has experienced a significant decrease in net income over the past 12 months. The company has only produced $61.69 million, compared to the $174.4 million produced in 2019. This represents a decrease of about $112 million, or 65%.

Texas Roadhouse currently has $282.49 million in cash and $817.57 billion in total debt. The company’s balance sheet holds $2.13 billion in total assets and $1.26 billion in total liabilities. Texas Roadhouse's total equity stands at $868 million.

Despite the company operating in one of the most heavily impacted sectors of the economy, Texas Roadhouse has shown stability throughout 2020. The company has only taken losses in the first quarter of this year, so far. Texas Roadhouse also has a very manageable balance sheet along with a great record of consistent revenue and net income growth. However, the new spike in COVID-19 cases has Texas Roadhouse and other "reopening" stocks facing a longer recovery than company had expected.

TXRH stock currently trades at a pretty high price when one closely considers the inflated price-earnings ratio of 78.18. TXRH stock's forward price-earnings ratio shows more promise, but may be deceptive if the pandemic continues to worsen. Unless the company beats earnings in a major way, TXRH stock is likely to show some weakness in the short-term. Texas Roadhouse is a stock to keep an eye on as a long-term investment at the right price. Investors may consider jumping into this stock at a better price, looking at under $45 per share.

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