Yahoo Finance Should You Be Adding Texas Roadhouse (NASDAQ:TXRH) To Your Watchlist Today?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Texas Roadhouse (NASDAQ:TXRH), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Texas Roadhouse
How Fast Is Texas Roadhouse Growing Its Earnings Per Share?
In the last three years Texas Roadhouse's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Texas Roadhouse boosted its trailing twelve month EPS from US$4.18 to US$4.97, in the last year. That's a 19% gain; respectable growth in the broader scheme of things.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Texas Roadhouse achieved similar EBIT margins to last year, revenue grew by a solid 14% to US$4.8b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Texas Roadhouse's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Texas Roadhouse Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$11b company like Texas Roadhouse. But we are reassured by the fact they have invested in the company. Holding US$58m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations over US$8.0b, like Texas Roadhouse, the median CEO pay is around US$14m.
Texas Roadhouse's CEO took home a total compensation package of US$5.3m in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Texas Roadhouse Worth Keeping An Eye On?
As previously touched on, Texas Roadhouse is a growing business, which is encouraging. Earnings growth might be the main attraction for Texas Roadhouse, but the fun does not stop there. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. It is worth noting though that we have found 1 warning sign for Texas Roadhouse that you need to take into consideration.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
