Photo by Andrew Neel on Unsplash
 

Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally. The company operates and franchises restaurants under the Texas Roadhouse, Bubba's 33, and Jaggers names. Texas Roadhouse started in 1993 and today has grown to over 700 restaurants system-wide in 49 states and ten foreign countries.
 

Market Leader

Texas Roadhouse got its start in 1993, when founder Kent Taylor opened the first restaurant in Clarksville, Indiana, from a dream sketched on a cocktail napkin. Kent’s goal was to own a place where everyone, of all ages, could come and have a great meal and great fun for a great price.

As Texas Roadhouse celebrates its 30th anniversary, the focus remains the same as it did in 1993. Texas Roadhouse is known for its specially seasoned aged steaks hand-cut daily, along with the free unlimited supply of roasted peanuts and freshly baked rolls. In addition to the delicious food, Texas Roadhouse offers entertainment in the form of line dancing and music on their jukeboxes.

In 2013, the first Bubba’s 33 restaurants opened. Bubba’s 33 is a sports restaurant concept, featuring burgers, pizza, and wings as well as a wide variety of appetizers. The first Jaggers opened in 2014, offering burgers, hand-breaded chicken tenders, and chicken sandwiches. As of December 27, 2022, the company and its franchisees operated 697 restaurants system-wide in 49 states and 10 foreign countries, including 652 Texas Roadhouse restaurants, 40 Bubba’s 33 restaurants, and five Jaggers restaurants.

During the past five years, Texas Roadhouse has generated impressive and profitable growth with revenues, net income, EPS, and dividends all compounding at double-digit rates.

The company has a five-year average return on equity (ROE) of 17.6%, including the lower results due to the pandemic. During 2022, Texas Roadhouse’s ROE expanded to a meaty 26%. Texas Roadhouse has a strong track record of returning capital to shareholders. Over the past five years, the company has generated $966 million in free cash flow and has returned $820 million to shareholders through dividends and share buybacks.
 

Healthy Balance Sheet

As of 12/28/2022, the company had a healthy balance sheet with $174 million in cash and equivalents, $50 million in long-term debt, and $1 billion in shareholders’ equity. Texas Roadhouse repaid $50 million of its long-term debt during the year. The company’s strong balance sheet and operating cash flow position the firm well to consistently grow dividends, acquire franchise restaurants, repurchase shares and pay down the remainder of its debt.
 

Strong Financial Results

Texas Roadhouse had strong fourth-quarter results, providing double-digit growth in revenues and earnings. For the full year, revenues increased 16% to a record $4 billion, representing outstanding growth as it was only five years ago that sales exceeded $2 billion for the first time. Net income increased 10% to $270 million in 2022 with EPS up 14% for the year.

In 2022, 23 company restaurants and seven international franchise restaurants were opened. In addition, the company acquired eight domestic franchise restaurants for approximately $39 million. Texas Roadhouse generated $265.6 million in free cash flow during the year and returned $336.9 million to shareholders through dividend payments of $124 million and share repurchases of $212.9 million. On February 14, 2023, the board of directors authorized a quarterly cash dividend of $.55 per share, representing a 20% increase from the prior year. The dividend currently yields a tasty 2.1%.

Weekly sales averaged over $146,000 for the first seven weeks of 2023, with comparable sales growth of 16%. The company’s restaurants have averaged more guests over the past seven weeks than in any period in their history. Management is expecting commodity inflation of 5% to 6% for 2023. However, the company has approximately 60% of its commodity basket locked in for the first half of the year and plans to implement a menu price increase of 2.2% in late March to help combat inflation.

In fiscal 2023, Texas Roadhouse expects positive comparable store sales growth and plans to open 25 to 30 new Texas Roadhouse and Bubba’s 33 locations as well as three Jaggers.

Long-term investors should consider ordering Texas Roadhouse for their portfolios, as the company is a high-quality market leader with profitable operations, a healthy balance sheet, and strong financial results. Buy.

More By This Author:

Stock Profile: LVMH Moët Hennessy – Louis Vuitton
Portfolio Highlights: Quarterly Movers & Shakers, March 2023
Smartly Investing In Artificial Intelligence