Investment Thesis
Texas Roadhouse demonstrates solid operational efficiency with 9.4% revenue growth and strong free cash flow generation ($178.9M, 11% FCF margin), supported by minimal debt burden (D/E 0.03x). However, net income declined 2.1% and EPS fell 5.7% YoY despite revenue growth, signaling margin compression, compounded by liquidity concerns evident in low current (0.46x) and quick (0.40x) ratios.
Strengths
- Strong revenue growth of 9.4% YoY demonstrates market demand and expansion capability
- Exceptional free cash flow generation of $178.9M with 11.0% FCF margin indicates efficient capital deployment
- Fortress-like balance sheet with minimal debt ($50M LT debt, D/E 0.03x) and exceptional interest coverage of 407.6x
- Solid operating margins of 9.0% and net margins of 7.6% appropriate for casual dining sector
Risks
- Profitability decline (NI -2.1%, EPS -5.7% YoY) despite revenue growth signals margin compression from labor, commodity, or operational cost pressures
- Weak liquidity position with current ratio of 0.46x and quick ratio of 0.40x indicates potential short-term cash flow challenges
- Modest returns on equity (8.1%) and assets (3.5%) suggest limited shareholder value creation relative to asset base
- Casual dining sector faces structural headwinds from labor cost inflation, competitive intensity, and shifting consumer preferences
Key Metrics to Watch
- Operating margin trends and unit-level profitability to assess cost control and pricing power
- Liquidity metrics (current ratio, cash conversion cycle) for sustainability of dividend and capital programs
- Same-store sales growth and traffic patterns to differentiate organic growth from price inflation
Financial Metrics
Revenue
1.6B
Net Income
123.4M
EPS (Diluted)
$1.87
Free Cash Flow
178.9M
Total Assets
3.6B
Cash
214.6M
Profitability Ratios
Gross Margin
N/A
Operating Margin
9.0%
Net Margin
7.6%
ROE
8.1%
ROA
3.5%
FCF Margin
11.0%
Balance Sheet & Liquidity
Current Ratio
0.46x
Quick Ratio
0.40x
Debt/Equity
0.03x
Debt/Assets
57.0%
Interest Coverage
407.64x
Long-term Debt
50.0M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-09T13:35:52.481482 |
Data as of: 2026-03-31 |
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