Texas Roadhouse Q3 Earnings: Is NasdaqGS:TXRH Expensive at 221.1x Forward P/E?

in EARNINGS/INVESTING IDEAS by

Texas Roadhouse, Inc. (NasdaqGS:TXRH) is scheduled to report Q3 earnings results after markets close for trading on October 28, 2020.

The company is expected to report earnings of $0.18/share on revenue of $614.8 million. The consensus earnings per share (EPS) of $0.18/share is based on a poll of 25 analysts and represents a decline in eps of −65.2% over the same quarter last year, when the company reported earnings of $0.52/share.

The revenue forecast of $614.8 million based on a poll of 21 analysts implies a year-over-year (YoY) decline in revenue of −5.5%. Last year the company reported $650.5 million in revenue for the quarter.

Expected to report EPS contraction of −65.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $614.77 $650.49 −5.5%
EPS $0.18 $0.52 −65.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, missed 3 quarters, and met expectations 1 quarter.

What are your expectations from Texas Roadhouse, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.60 -$0.48 19.7% Beat
Q1, 2020 $0.40 $0.23 −42.1% Missed
Q4, 2019 $0.52 $0.61 16.9% Beat
Q3, 2019 $0.46 $0.52 12.8% Beat
Q2, 2019 $0.63 $0.63 0% Met
Q1, 2019 $0.81 $0.70 −14.1% Missed
Q4, 2018 $0.41 $0.42 3.0% Beat
Q3, 2018 $0.54 $0.40 −26.5% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 6.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 3, 2020 $56.19 $59.68 6.2% Increase
May 4, 2020 $44.86 $43.66 −2.7% Decline
February 20, 2020 $65 $71.52 10.0% Increase
October 28, 2019 $49.76 $60.31 21.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.06, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.06 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Texas Roadhouse, Inc. is currently trading at $74.16/share, up 2.1% for the day. The company is trading at approximately 98.3% of its 52-week high of $75.42/share. The company’s stock price is up 24.3% since the last earnings report and up 2.5% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 69.12 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:TXRH Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 83.43 and a forward P/E multiple of 221.14.

Texas Roadhouse, Inc.’s current share price also implies a price-to-book (P/B) multiple of 5.93. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $74.16
P/E Ratio 83.4x
P/E Ratio (Fwd) 221.1x
PEG Ratio −1.4
Total Debt / Total Capital 13.9%
Levered Free Cash Flow $40.736 million
EV / EBITDA 31.1x

Finbox

Texas Roadhouse, Inc. is a mid-cap stock with a market capitalization of $5.147 billion and a total enterprise value of $5.697 billion. The company operates in the Consumer Discretionary sector and the Hotels, Restaurants & Leisure industry.

Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally. The company operates and franchises Texas Roadhouse and Bubba’s 33 restaurants. As of December 31, 2019, it operated 514 domestic restaurants and 97 franchise restaurants. Texas Roadhouse, Inc. was founded in 1993 and is based in Louisville, Kentucky.

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