Texas Roadhouse, Inc. (TXRH): A Bull Case Theory

We came across a bullish thesis on Texas Roadhouse, Inc. on The Frugal Investor’s YouTube Channel. In this article, we will summarize the bulls’ thesis on TXRH. Texas Roadhouse, Inc.'s share was trading at $189.74 as of January 13th. TXRH’s trailing and forward P/E were 28.97 and 28.41, respectively according to Yahoo Finance.

While most investors chase the next AI driven winner, Texas Roadhouse stands out as a compelling non tech opportunity after its shares declined nearly 12% over the past six months despite the business continuing to deliver some of the strongest fundamentals in the restaurant industry. The company operates more than 700 locations nationwide and benefits from a simple but powerful model built on high traffic, strong customer loyalty, and consistent execution without relying on heavy promotions or marketing.

Investor concerns around rising wages, commodity inflation, and a potentially softening consumer have pressured the stock, yet operating data points to a very different reality. Customer traffic has increased about 4%, same store sales continue to climb, rising roughly 6% at company owned locations and approximately 12% year over year, and persistently long wait times highlight sustained demand across markets.

Several catalysts are turning supportive, including stabilizing beef prices, wage growth slowing to around 3%, and improving restaurant traffic as discretionary spending is expected to rebound alongside future rate cuts. Texas Roadhouse has maintained resilient restaurant level margins despite cost pressures, reflecting superior store level management and ongoing efficiency initiatives.

New unit openings continue to ramp quickly, with average locations generating more than $200,000 per week, creating a growth pipeline that is not heavily dependent on the broader economy. Strong and consistent free cash flow allows the company to fund expansion, pay dividends, and maintain a conservative balance sheet without increasing debt.

Supported by favorable demographic trends, high customer satisfaction, and roughly 96% institutional ownership, the recent pullback appears disconnected from the company’s operating strength, positioning Texas Roadhouse as an attractive long term compounder with meaningful upside as fundamentals reassert themselves.

Previously, we covered a bullish thesis on Texas Roadhouse, Inc. (TXRH) by Summit Stocks in February 2025, which highlighted the company’s differentiated operating model, strong unit economics, disciplined expansion, and resilient cash flows. TXRH’s stock price has appreciated by approximately  10.28% since our coverage. This is because short term macro concerns weighed on sentiment despite fundamentals remaining intact. The Frugal Investor shares a similar thesis but emphasizes recent margin catalysts, traffic strength, and valuation dislocation created by the pullback.

Texas Roadhouse, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held TXRH at the end of the third quarter which was 39 in the previous quarter. While we acknowledge the potential of TXRH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.