Breaking Down Texas Roadhouse, Inc. (TXRH) Financial Health: Key Insights for Investors

You're looking at Texas Roadhouse, Inc. (TXRH) and seeing a stock that keeps defying gravity, but the underlying financial health shows a classic battle between consumer demand and cost pressure. The direct takeaway is that while their value proposition is still pulling in traffic, margin compression is a defintely near-term risk you need to map out.

Honestly, the top-line performance is fantastic: Trailing Twelve Months (TTM) revenue through September 30, 2025, hit an impressive $5.834 billion, a 14.4% jump year-over-year. Plus, their comparable restaurant sales-a key metric for a restaurant chain-were up a solid 6.1% in the third quarter alone. That means people are still lining up for those rolls.

But here's the quick math on the risk: Management is guiding for commodity cost inflation of approximately 4% and wage and other labor inflation of around 4% for the full 2025 fiscal year. This squeeze is real, and it's why their Q3 earnings per share (EPS) of $1.25 missed the consensus estimate. We need to dig into how they plan to manage that 4% inflation while still pushing for a full-year revenue consensus of roughly $6.00 billion.

Revenue Analysis

You need to know where Texas Roadhouse, Inc. (TXRH) is actually making its money, and the answer is simple: it's a high-volume, company-owned restaurant machine. The core takeaway for 2025 is a continuation of strong top-line momentum, with trailing twelve-month (TTM) revenue hitting approximately $5.834 billion as of September 30, 2025, representing a robust 14.4% year-over-year increase.

The company's revenue streams are not complex, but their scale is impressive. It primarily flows from two sources: sales from company-owned restaurants and, to a much smaller degree, franchise royalties and fees. The company's strategy is clear: grow through new store openings and maintain traffic at existing stores.

Primary Revenue Sources: The Restaurant Mix

The vast majority of revenue comes from the flagship Texas Roadhouse brand, which is the engine of the business. As of mid-2025, the company operated 695 restaurants, with 634 of those being the core Texas Roadhouse locations. This sheer dominance means the financial health of the main brand dictates the company's overall revenue performance. The other two brands, Bubba's 33 and Jaggers, are important growth vehicles but currently contribute a much smaller slice of the total revenue pie.

Here's the quick math on weekly sales, which shows the brand power:

• Texas Roadhouse: Averaged approximately $157,325 in weekly sales in Q3 2025.
• Bubba's 33: Averaged approximately $119,000 in weekly sales in Q3 2025.
• Jaggers: Averaged over $75,000 in weekly sales in Q3 2025.

The Texas Roadhouse brand is defintely the cash cow, driving higher average unit volumes.

Growth Drivers and Shifting Sales Channels

The revenue growth isn't just from opening new locations; it's also from getting more out of the existing ones. Comparable restaurant sales-a key metric for the industry-increased by a solid 6.1% in the third quarter of 2025. This means more guests are coming in, and they are spending slightly more per visit.

A significant, and growing, component of sales is the to-go business (off-premise sales). This channel is a structural shift, not a temporary pandemic boost. In Q3 2025, to-go sales were approximately $21,409 of the average weekly sales, representing 13.6% of total weekly sales. That's a huge chunk of revenue you can't ignore.

Also, keep an eye on the company's acquisitions. Management is actively converting franchise locations to company-owned restaurants, like the acquisition of 17 domestic franchise restaurants year-to-date in 2025. This moves revenue from the lower-margin franchise fee line item to the higher-volume company restaurant sales line, which boosts total revenue but also increases operating expenses. You can dive deeper into who is driving this action in Exploring Texas Roadhouse, Inc. (TXRH) Investor Profile: Who's Buying and Why?

Revenue Growth History: Consistent Momentum

The company has maintained a remarkably consistent growth trajectory, which is a sign of a strong, well-executed business model in the casual dining sector. This isn't a flash in the pan; this is a long-term trend.

Here's the recent annual revenue growth, showing sustained double-digit increases:

The growth rate remains in the mid-teens, which is exceptional for a company of this scale. The risk here is that the growth is increasingly reliant on new store openings, which require significant capital expenditure, but the demand is clearly there to support it.

Profitability Metrics

You need to know how Texas Roadhouse, Inc. (TXRH) is actually turning its high sales into shareholder profit, especially with inflation squeezing the entire restaurant sector. The quick takeaway is that TXRH is a top-quartile performer, with its trailing twelve-month (TTM) Net Profit Margin of 7.49% significantly outpacing the casual dining industry average of 3% to 6%. That's a strong sign of operational discipline.

For the TTM period ending September 30, 2025, Texas Roadhouse, Inc. generated $5.834 billion in total revenue. Here is the breakdown of the key profitability figures, which reflect the company's ability to manage its costs from the kitchen to the corporate office:

• Gross Profit: The company posted a TTM Gross Profit of approximately $0.975 billion. This translates to a Gross Profit Margin of roughly 16.71% of revenue.
• Operating Profit: TTM Operating Income (or Operating Profit) was approximately $0.517 billion, giving an Operating Profit Margin of about 8.86%.
• Net Profit: Net Income for the TTM period was approximately $0.437 billion, resulting in a Net Profit Margin of 7.49%.

Profitability Trends and Industry Comparison

While the absolute numbers are strong, the trend reveals a tougher environment. The company's TTM Net Profit Margin of 7.49% is still excellent, positioning Texas Roadhouse, Inc. closer to the top-quartile casual dining margin of 8% to 12% than the average 3% to 6%. But, the core operational metric, Restaurant Margin, is under pressure. This is where the rubber meets the road.

Here's the quick math on the operational squeeze:

• Commodity inflation (food costs) hit 5.1% for the 39 weeks ended September 30, 2025.
• Wage and other labor inflation added another 4.1% cost pressure.

These rising costs caused the Restaurant Margin-the profit left after food, labor, and restaurant operating expenses-to fall to 16.0% for the 39 weeks ended September 30, 2025, a decrease of 118 basis points (1.18%) from the prior year. The company is defintely feeling the pinch, but its overall Net Profit Margin remains robust because of high sales volume and efficient overhead management.

Operational Efficiency and Cost Management

Texas Roadhouse, Inc.'s operational efficiency is evident in its ability to maintain strong corporate margins despite restaurant-level pressure. The company's strategy focuses on driving traffic and using targeted price increases to offset inflation.

To combat the margin compression, Texas Roadhouse, Inc. implemented a menu price increase of approximately 1.7% at the start of the fourth quarter of 2025. This action, coupled with continued strong comparable restaurant sales growth-which was 6.1% for the third quarter of 2025-is the primary lever to stabilize margins. Management is also investing in digital and operational efficiencies to drive long-term profitability. You can dig deeper into who is driving this performance by Exploring Texas Roadhouse, Inc. (TXRH) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

Texas Roadhouse, Inc. (TXRH) has a remarkably conservative financial structure, which is a major positive signal for investors. The company's approach leans heavily on equity and internally generated cash flow, keeping its debt load low, especially compared to its peers.

As of June 2025, Texas Roadhouse, Inc.'s total debt and capital lease obligations stood at approximately $923 Million, which is a manageable figure given their scale and cash generation. This total breaks down into about $31 Million in short-term debt and capital lease obligations and approximately $892 Million in long-term debt and capital lease obligations. This is defintely a low-leverage model.

The core metric to watch is the debt-to-equity (D/E) ratio, which measures how much debt a company uses to finance its assets relative to the value of shareholders' equity. For Texas Roadhouse, Inc. (TXRH), the D/E ratio as of the second quarter of 2025 was approximately 0.64. Here's the quick math: total debt of $923 Million divided by total stockholders' equity of about $1,451 Million gives you that 0.64 ratio.

This ratio is significantly lower than the industry median, signaling a much lower financial risk profile. For context, the median debt-to-equity ratio for the 'Eating And Drinking Places' industry in 2024 was around 2.01, and the broader 'Restaurants' industry average for 2025 is estimated at 3.456.

• TXRH D/E Ratio: 0.64
• Industry Median D/E Ratio: 2.01
• Lower D/E means less reliance on borrowing.

The company's preference for internal financing over debt is clear in its capital allocation strategy. You see this in how they fund growth: they generated over $750 million in operating cash flow in 2024, which was used to self-fund $354 million of capital expenditures for new restaurants and digital kitchen conversions.

They also returned capital to shareholders through $163 million in dividends and $80 million in share repurchases in 2024. This robust cash flow generation and low debt structure give management tremendous flexibility to buy back shares, increase dividends, or accelerate new restaurant openings without having to issue new debt, which is a huge competitive advantage. The existing credit facility is primarily a backstop, not a primary funding source, and its use is strictly governed by financial covenants. The company is not actively issuing new debt, but rather focusing on organic growth and shareholder returns, which aligns with their Mission Statement, Vision, & Core Values of Texas Roadhouse, Inc. (TXRH).

What this estimate hides is the true operating lease exposure, which is often a significant liability for restaurant chains. Still, the reported D/E ratio of 0.64, even including capital leases, shows a very healthy balance sheet. The company has essentially chosen equity and retained earnings as its primary engine for expansion, a choice that insulates it from interest rate volatility and economic downturns far better than its highly leveraged competitors.

Liquidity and Solvency

You're looking at Texas Roadhouse, Inc. (TXRH) and wondering if they have enough cash to run the business and fund their growth. The short answer is yes, they do, but the balance sheet ratios tell a classic restaurant industry story: weak liquidity on paper, but powerful cash flow in reality. You have to look past the standard metrics here.

For the quarter ending June 2025, Texas Roadhouse, Inc.'s Current Ratio was just 0.45. This means they only hold 45 cents in current assets (like cash and receivables) for every dollar of current liabilities (like accounts payable and accrued expenses). Their Quick Ratio is even lower, near zero, which is defintely not a surprise. Restaurants carry a lot of inventory-food, essentially-and since the Quick Ratio strips that out, it almost always looks poor for this sector. That's why you can't rely solely on these two numbers for a restaurant chain.

Here's the quick math on their working capital trend for the first half of 2025. Working capital is current assets minus current liabilities, and for Texas Roadhouse, Inc., it's typically negative because they collect cash instantly and pay suppliers later. The change in working capital, net of acquisitions, for the 26 weeks ended July 1, 2025, was a positive but small $4.43 million, which is a big drop from the $38.09 million generated in the same period a year prior. This suggests less of a short-term cash benefit from timing differences with payables, but it's not a crisis; it's just less of a tailwind.

The real strength is in the cash flow statement, which is the engine of their liquidity. For the 26 weeks ended July 1, 2025, Texas Roadhouse, Inc. generated a robust $365.98 million in Net cash provided by operating activities (CFO). This is the cash generated from selling steaks and rolls, and it's what funds everything else. This strong operating cash allows them to aggressively deploy capital for growth and shareholder returns.

The cash flow breakdown shows where the money is going:

• Operating Cash Flow (CFO): $365.98 million provided. This is the primary liquidity strength.
• Investing Cash Flow (CFI): $259.53 million used. A significant outflow, mostly for property and equipment (CapEx) and acquiring franchise restaurants.
• Financing Cash Flow (CFF): $174.88 million used. This covers dividends paid ($90.29 million) and share repurchases ($60.41 million).

The company is intentionally using its cash to fuel expansion-like the planned $400 million in capital expenditures for the full fiscal year 2025-and reward shareholders, which is a sign of management confidence. They ended the 26-week period with $176.80 million in cash and cash equivalents. So, while the Current Ratio is low, the consistent, high-volume operating cash flow is the true measure of their liquidity strength. They are solvent and liquid enough to execute their growth strategy, which you can read more about in their Mission Statement, Vision, & Core Values of Texas Roadhouse, Inc. (TXRH).

Finance: Track the CapEx spending against the $400 million guidance to ensure growth remains disciplined.

Valuation Analysis

You're looking at Texas Roadhouse, Inc. (TXRH) and asking the core question: is this stock priced fairly? The short answer is that the market sees it as slightly expensive compared to historical norms but still a solid 'Moderate Buy,' banking on their consistent growth and operational strength.

As of November 2025, the stock trades at a premium, which is typical for a high-performing restaurant chain with a strong balance sheet. The key is whether that premium is justified by future earnings, and analysts seem to think it is, but with some caution.

Is Texas Roadhouse, Inc. (TXRH) Overvalued or Undervalued?

To gauge the current valuation, we look at three core multiples: Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA). These ratios tell us what the market is willing to pay for a dollar of the company's earnings, assets, and operating profit, respectively.

Here's the quick math on Texas Roadhouse, Inc.'s valuation as of the 2025 fiscal year data:

• Price-to-Earnings (P/E): The P/E ratio stands at approximately 25.38. This is higher than the broader S&P 500 average and suggests investors expect above-average earnings growth.
• Price-to-Book (P/B): The P/B ratio is a high 7.54. This multiple is defintely high for the restaurant industry, indicating that a large portion of the company's value comes from intangible assets like brand equity and operational efficiency, not just its physical property.
• Enterprise Value-to-EBITDA (EV/EBITDA): The EV/EBITDA is around 16.46. This multiple, which is capital structure-neutral, suggests a healthy valuation, but it's on the higher end when compared to some peers, signaling a premium for their consistent cash flow generation.

The high multiples point to a stock that is not cheap-it's priced for continued execution and growth. You are paying for quality and consistency here, not a deep value play. For more context on who is driving this valuation, consider Exploring Texas Roadhouse, Inc. (TXRH) Investor Profile: Who's Buying and Why?

Stock Performance and Shareholder Returns

The stock price trend over the last 12 months shows the volatility inherent in the consumer discretionary sector. Texas Roadhouse, Inc. hit a 52-week high of approximately $206.04 in late November 2024 and a 52-week low of $148.73 in April 2025. As of November 2025, the stock trades around $173.43, marking a decline of about 10.47% over the last year. Still, the long-term trend remains strongly upward.

Regarding shareholder returns, Texas Roadhouse, Inc. offers a modest but reliable dividend. The annualized dividend per share is currently $2.72. This translates to a dividend yield of roughly 1.6%. The dividend payout ratio is comfortable at approximately 40.3% of earnings. This ratio is sustainable and leaves plenty of room for reinvestment in new restaurant openings and corporate growth, which is exactly what you want to see in a growing company.

Analyst Consensus and Price Targets

Wall Street's view on Texas Roadhouse, Inc. is generally positive, but with a cautious undertone following recent market fluctuations. The consensus analyst rating from 23 research firms is a 'Moderate Buy'.

The average one-year price target is approximately $193.21. This target suggests an upside potential of about 11.4% from the current November 2025 price of $173.43, which is a decent return profile for a mature growth stock.

The distribution of ratings tells the real story, though:

The split between 'Buy' (12 total) and 'Hold' (10) indicates that while most see value, a significant portion is waiting for a better entry point or clearer signs of margin expansion. It's not a unanimous 'Strong Buy,' so you need to be selective about your entry price.

Risk Factors

You're looking at Texas Roadhouse, Inc. (TXRH) and seeing strong revenue growth, but the real question is whether they can keep the margins fat in this inflationary environment. Honestly, the core risk isn't a lack of customer demand-their comparable sales were up 6.1% in Q3 2025-it's the relentless squeeze on the cost side. That's the near-term headwind you need to watch.

The biggest external risk is commodity price volatility, specifically beef. Beef accounts for roughly half of their food and beverage costs, and in Q3 2025, Texas Roadhouse navigated a massive 7.9% inflation rate on commodities. This is a huge jump, and management has adjusted their full-year 2025 commodity inflation guidance to approximately 6%. This cost pressure is what drove the restaurant margin percentage down by 168 basis points to just 14.3% in the third quarter. It's a classic case of top-line strength masking a bottom-line challenge.

Operational and financial risks are tied directly to these external pressures. The company's diluted earnings per share (EPS) for Q3 2025 was $1.25, which actually missed the consensus analyst estimate of $1.28. That miss, even with strong sales, shows the market's sensitivity to margin compression. Labor costs are also a persistent issue, with wage and other labor inflation running at 3.9% in Q3 2025, aligning with their full-year guidance of approximately 4%.

Here's the quick math on the inflation challenge:

• Commodity Inflation (Q3 2025): 7.9% (Primarily beef)
• Labor Inflation (Q3 2025): 3.9%
• Restaurant Margin (Q3 2025): 14.3% (Down from 16.0% in Q3 2024)

To be fair, Texas Roadhouse has a clear, actionable mitigation strategy. They are defintely not sitting still. Their primary defense is strategic pricing power and operational efficiency. They implemented a conservative 1.7% menu price increase at the start of Q4 2025, on top of an earlier 1.4% hike, betting that their value proposition is strong enough to absorb the increase without losing traffic. So far, it's working; guest traffic remains robust. Also, they are using technology to fight labor waste, with digital kitchen and guest management systems deployed in 95% of locations. This helps them manage that 4% labor inflation.

On the strategic front, they are focused on expansion to drive growth. They plan to open approximately 30 new company-owned restaurants in 2025 and are committing significant capital, with total capital expenditures guided at approximately $400 million for the year. This aggressive store growth, plus the acquisition of 13 franchised locations, is their long-term lever against macro risks. You can read more about their core philosophy here: Mission Statement, Vision, & Core Values of Texas Roadhouse, Inc. (TXRH).

The table below summarizes the key financial risks and the company's direct response:

Growth Opportunities

You're looking for a clear map of where Texas Roadhouse, Inc. (TXRH) goes from here, and the answer is simple: they are doubling down on what works-unit expansion and operational efficiency-even as inflation bites. The core growth story for 2025 is a disciplined physical expansion coupled with smart technology to protect their industry-leading traffic.

The company's primary growth engine remains new restaurant development and strategic acquisitions. For the 2025 fiscal year, Texas Roadhouse, Inc. is on track to open approximately 30 new company-owned restaurants across its brands. This includes expanding their footprint with up to seven Bubba's 33 locations and one Jaggers restaurant, diversifying their revenue streams into the fast-casual segment. Plus, they strategically acquired 13 franchised Texas Roadhouse restaurants at the start of the year, which immediately enhances control over operations and captures more unit-level margin.

Here's the quick math on their recent performance: for the twelve months ending September 30, 2025, Texas Roadhouse, Inc. reported a trailing revenue of $5.834 billion, a 14.4% increase year-over-year. This top-line momentum is driven by strong comparable sales, which grew 6.1% in the third quarter of 2025, largely due to a 4.3% increase in guest traffic. That traffic outperformance is the real competitive advantage in a casual dining sector where most peers are struggling to maintain customer counts.

What this estimate hides, still, is the pressure on margins. The company is navigating a tough cost environment, with full-year 2025 commodity inflation guidance sitting at a high 5% to 6% and labor costs expected to rise 4% to 5%. To counter this, they've been judicious with pricing, implementing a 1.4% menu price increase in Q2 2025 and planning another modest hike later in the year, keeping their value proposition intact. You can defintely see their commitment to value by how they manage these increases.

• Open 30 new company-owned units in 2025.
• Acquire 13 franchise locations for margin capture.
• Roll out Digital Kitchen System to 100% of locations by year-end.
• Maintain industry-leading traffic growth (4.3% in Q3 2025).

The investment in technology is a crucial, non-glamorous driver. By implementing the Digital Kitchen System in 65% of locations and aiming for full conversion by year-end, they are streamlining kitchen operations to reduce waste and improve throughput. This operational rigor is how they absorb cost inflation without sacrificing the customer experience. This is a business built on execution, not just hype.

For a deeper dive into the ownership structure behind this growth, you might want to check out Exploring Texas Roadhouse, Inc. (TXRH) Investor Profile: Who's Buying and Why?. Anyway, the strategic playbook is clear: new units, more control via acquisitions, and technology to keep the kitchen efficient. It's a low-volatility, high-conviction growth strategy.

Here is a snapshot of the key 2025 growth metrics: