On Thursday, Goldman Sachs (NYSE:GS) initiated coverage on Texas Roadhouse (NASDAQ:TXRH) stock, a popular steakhouse chain, with a Neutral rating and set a price target of $213.00. The shares, currently trading near its 52-week high of $206.04, has delivered an impressive 65% return year-to-date.
According to InvestingPro data, 23 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting strong confidence in the company's near-term prospects.
Texas Roadhouse has been outperforming the casual dining industry, particularly after the COVID-19 pandemic, by maintaining prices below inflation and focusing on in-store service quality.
The steakhouse chain has seen a consistent increase in customer traffic, with an average annual growth of 2-3%, except for the year 2020. This growth has led to a significant rise in the company's valuation multiple in recent years.
Goldman Sachs expects this trend to continue, with an estimated average traffic growth of 3% in the years 2024 to 2026, which is expected to drive mid-single-digit same-store sales growth (SSSG) and further margin expansion.
The company's robust revenue growth of 13.91% in the last twelve months supports this optimistic outlook. InvestingPro analysis reveals over 15 additional key insights about Texas Roadhouse's performance and valuation metrics.
According to the coverage, Texas Roadhouse's strategy has allowed it to command a premium valuation compared to its peers. The company's price-to-earnings (P/E) ratio is projected at 29 times for the fifth to eighth quarters ahead, compared to the low 20 times P/E ratio it had prior to the pandemic.
This expanded premium is attributed to the brand's sustained positive traffic growth momentum and its ability to adapt and thrive in a post-COVID market environment.
The outlook for Texas Roadhouse remains positive as the company continues to leverage its relative price advantage and its emphasis on customer service to drive growth. The Neutral rating suggests that Goldman Sachs views the stock as fairly valued at the current price level, with the potential for steady performance in the near future.
InvestingPro's comprehensive analysis indicates the company maintains a "GREAT" overall financial health score, while consistently raising its dividend for 4 consecutive years. For detailed valuation metrics and in-depth analysis, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Texas Roadhouse, Inc. has approved a dividend payment of $0.61 per share for its shareholders, demonstrating its commitment to consistent financial returns. The casual dining chain also reported robust financial performance in the third quarter, with an 8.5% increase in same-store sales and revenue of approximately $1.3 billion. The company also announced the successful opening of seven company-owned and three international franchise locations.
Furthermore, Texas Roadhouse has provided guidance for the future, projecting a revenue growth of 13.5% and a diluted earnings per share increase of 32.5% to $1.26. The company also updated its commodity inflation guidance to less than 1% for 2024, with a 2% to 3% forecast for 2025, and labor inflation projected at 4% to 5% for 2025.
In terms of expansion, Texas Roadhouse plans to open approximately 30 new restaurants in 2025 and acquire 13 franchised locations. The company also celebrated its 20-year anniversary as a public entity and a 20-year partnership with Homes For Our Troops. These are the key recent developments for the company.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.