# Texas Roadhouse Inc. (TXRH) — Financial Analysis

**Exchange:** NASDAQ  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-27  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/TXRH/thesis · /stocks/TXRH/memo

## Financial Snapshot

---
title: "Step 04 — Financial Snapshot & Adversarial Research Sweep"
ticker: TXRH
company: Texas Roadhouse, Inc.
date: 2026-05-27
source: coverage-next-full
---

### Step 04 — Financial Snapshot: Texas Roadhouse, Inc. (TXRH)

#### 1. Income Statement Quality

##### Annual Summary (USD millions)

| Metric | FY2025 | FY2024 | FY2023 | FY2022 | FY2021 |
|--------|--------|--------|--------|--------|--------|
| Revenue | 5,878 | 5,373 | 4,632 | 4,015 | 3,464 |
| Gross Profit | 937 | 947 | 735 | 654 | 607 |
| Operating Income | 475 | 517 | 354 | 320 | 297 |
| Net Income | 406 | 434 | 305 | 270 | 245 |
| EPS (Diluted) | 6.10 | 6.47 | 4.54 | 3.97 | 3.50 |
| Revenue Growth | +9.4% | +16.0% | +15.4% | +15.9% | — |
| Operating Margin | 8.1% | 9.6% | 7.6% | 8.0% | 8.6% |
| Net Margin | 6.9% | 8.1% | 6.6% | 6.7% | 7.1% |

**Key observation:** FY2025 showed operating margin compression to 8.1% (vs. 9.6% in FY2024) due to commodity inflation (9.5% in Q4-2025), despite revenue growth of +9.4%. This is a cyclical, not structural, compression in management's view [S8].

##### Earnings Quality Adjustments

| Item | Treatment | Direction |
|------|-----------|-----------|
| Operating Leases (ROU assets) | Included in "debt" for leverage; depreciation in P&L | Neutral |
| Stock-Based Compensation | SBC is real economic cost; not adjusted out | Conservative |
| Deferred Revenue (gift cards) | Standard GAAP breakage; minor | Neutral |
| Restaurant Pre-Opening Costs | Expensed as incurred — conservative accounting | Favorable |

No material non-GAAP adjustments are characteristic of TXRH. The company reports clean GAAP financials. Restaurant margin is the most-watched non-GAAP KPI (excludes D&A and corporate overhead from restaurant-level calculation).

#### 2. Balance Sheet Quality

| Metric | FY2025 | FY2024 | Notes |
|--------|--------|--------|-------|
| Cash & Equivalents | $135M | $245M | Decline reflects higher capex/buybacks |
| Total Debt (incl. leases) | $974M | $854M | Dominated by operating leases |
| Long-Term Financial Debt | ~$0 | ~$0 | Essentially no term debt; revolving credit facility |
| Operating Leases | $943M | $826M | Grow with new restaurant openings |
| Net Debt | $839M | $609M | Net debt/EBITDA ~1.3x at FY2025 [S2] |
| Total Equity | $1,482M | $1,374M | Growing; ROE ~29% |
| Current Ratio | 0.46x | — | Typical for restaurants (negative working capital) |

**Balance sheet assessment: STRONG.** TXRH has minimal traditional financial debt (no term loans, minimal revolver draws). The operating lease obligations represent real economic commitments (restaurant leases) but are well-covered by operating cash flow. The company's cash generation allows it to fund growth capex plus return capital via dividends and buybacks simultaneously.

#### 3. Cash Flow Quality

| Metric | FY2025 | FY2024 | FY2023 | FY2022 |
|--------|--------|--------|--------|--------|
| Operating Cash Flow | 730 | 754 | 565 | 512 |
| CapEx | (388) | (354) | (347) | (246) |
| Free Cash Flow | 342 | 399 | 218 | 266 |
| FCF Conversion (FCF/NI) | 84% | 92% | 71% | 99% |
| Dividends | (180) | (163) | (147) | (124) |
| Buybacks | (170) | (98) | (63) | (226) |
| FCF after Capital Return | ~$(8M) | $138M | $8M | $(84M) |

**FCF quality: VERY HIGH.** Operating cash flow is consistently strong and growing with revenue. CapEx is high but investment-grade — it is buying new restaurants with demonstrated >20% cash-on-cash returns. The company has no need for external financing for growth.

**Note:** FY2025 FCF declined to $342M from $399M due to higher capex (35+ new restaurants) and commodity margin pressure. This is expected to be cyclical.

#### 4. Adversarial Research Sweep

*Note: Transcript analysis not performed (coverage-next-full path). Short reports, public criticism, and litigation reviewed via web search and public filings.*

##### Known Short / Bear Arguments
1. **Commodity Cost Vulnerability:** The single largest structural bear case is TXRH's beef exposure. 9.5% commodity inflation in Q4-2025 caused restaurant margins to compress to ~13.9% — a multi-year low. Bears argue management's reluctance to raise prices aggressively creates a permanent margin trap [S8].
2. **Mature Unit Growth Story:** At 784+ restaurants in 49 states, white space for new Texas Roadhouse units may be limited. Unit growth has moderated from prior expansion pace.
3. **Valuation Premium at Risk:** TXRH trades at ~29x trailing P/E vs. peer group of 12-19x. Any deceleration in comp sales or continued margin pressure could reprice the premium rapidly.
4. **Labor Cost Structure:** The managing partner model is a competitive advantage but also a cost commitment. As minimum wages rise and the labor market tightens, labor % of sales may creep higher structurally.

##### Legal / Regulatory / Investigations Review
- **No Material Litigation Found.** Web searches and SEC filing reviews did not surface any significant class action securities litigation, regulatory investigations, food safety class actions, or short seller reports targeting TXRH.
- **Standard industry risk disclosures** in 10-K: foodborne illness risk, employment law changes, liquor licensing.
- **No activist investor campaigns** identified.
- **ESG / labor:** No major labor union activity or organizing campaigns disclosed.

##### Accounting Concerns
- **None identified.** Revenue recognition is straightforward (point-of-sale). Lease accounting is standard ASC 842. No evidence of channel-stuffing, aggressive revenue timing, or related-party issues.
- The company has consistently received clean audit opinions.

##### Management Integrity
- **CEO Morgan has 9 insider sales, 0 insider buys** over 5 years [S5]. While concerning as a sentiment signal, this is not unusual for a post-founder company where founders and early executives have substantial equity from prior grants.
- No executive misconduct allegations found in public sources.
- Kent Taylor's legacy: respected internally and externally; Morgan is seen as a cultural steward, not a financial engineer.

#### 5. Key Financial Risks

| Risk | Severity | Management Response |
|------|----------|---------------------|
| Beef commodity inflation | HIGH (active) | Conservative pricing strategy; hedging limited; hoping for tariff relief |
| Labor cost inflation | MODERATE | Wage increases offset by traffic growth leverage |
| Consumer spending slowdown | MODERATE | Value positioning is a buffer; $12-25 check avg is affordable |
| Lease liability growth | LOW | Well-covered by operating cash flow |
| Accounting/governance | LOW | Clean financials; no material concerns |

#### 6. Source Index

| ID | Source |
|----|--------|
| S2 | StockAnalysis.com — financials, ratios |
| S3 | SEC EDGAR 8-K Q4-2024 |
| S5 | MarketBeat / GF — insider transactions |
| S8 | Restaurant Business Online, SignalBloom — beef cost pressures |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/TXRH/fundamental

## Navigation

- Overview: /stocks/TXRH
- Financials (this page): /stocks/TXRH/financials
- Thesis: /stocks/TXRH/thesis
- Investment Memo: /stocks/TXRH/memo
- Coverage universe: /stocks