Intrinsic value of Texas Roadhouse, Inc. - TXRH

Previous Close

$62.40

  Intrinsic Value

$24.65

stock screener

  Rating & Target

str. sell

-60%

Previous close

$62.40

 
Intrinsic value

$24.65

 
Up/down potential

-60%

 
Rating

str. sell

We calculate the intrinsic value of TXRH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 4.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  2,732
  3,021
  3,324
  3,640
  3,971
  4,314
  4,672
  5,045
  5,431
  5,833
  6,251
  6,685
  7,137
  7,606
  8,094
  8,602
  9,131
  9,682
  10,256
  10,855
  11,480
  12,132
  12,812
  13,523
  14,266
  15,043
  15,855
  16,705
  17,595
  18,526
Variable operating expenses, $m
  2,501
  2,765
  3,040
  3,329
  3,629
  3,943
  4,269
  4,608
  4,960
  5,326
  5,694
  6,090
  6,501
  6,928
  7,373
  7,836
  8,318
  8,820
  9,343
  9,888
  10,457
  11,051
  11,671
  12,318
  12,995
  13,703
  14,443
  15,217
  16,027
  16,876
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,501
  2,765
  3,040
  3,329
  3,629
  3,943
  4,269
  4,608
  4,960
  5,326
  5,694
  6,090
  6,501
  6,928
  7,373
  7,836
  8,318
  8,820
  9,343
  9,888
  10,457
  11,051
  11,671
  12,318
  12,995
  13,703
  14,443
  15,217
  16,027
  16,876
Operating income, $m
  231
  257
  284
  312
  341
  372
  404
  437
  471
  507
  557
  596
  636
  678
  721
  766
  813
  863
  914
  967
  1,023
  1,081
  1,141
  1,205
  1,271
  1,340
  1,413
  1,488
  1,567
  1,650
EBITDA, $m
  349
  386
  425
  465
  507
  551
  597
  644
  694
  745
  799
  854
  912
  972
  1,034
  1,099
  1,167
  1,237
  1,310
  1,387
  1,467
  1,550
  1,637
  1,728
  1,823
  1,922
  2,026
  2,134
  2,248
  2,367
Interest expense (income), $m
  1
  0
  3
  7
  10
  14
  17
  21
  26
  30
  34
  39
  44
  49
  54
  59
  65
  71
  77
  83
  90
  97
  104
  111
  119
  127
  136
  145
  154
  164
  174
Earnings before tax, $m
  231
  253
  277
  302
  328
  354
  382
  411
  442
  473
  518
  552
  587
  624
  662
  701
  743
  786
  831
  877
  926
  977
  1,030
  1,086
  1,144
  1,204
  1,268
  1,334
  1,404
  1,476
Tax expense, $m
  62
  68
  75
  81
  88
  96
  103
  111
  119
  128
  140
  149
  159
  168
  179
  189
  201
  212
  224
  237
  250
  264
  278
  293
  309
  325
  342
  360
  379
  399
Net income, $m
  168
  185
  202
  220
  239
  259
  279
  300
  322
  345
  378
  403
  429
  455
  483
  512
  542
  574
  606
  640
  676
  713
  752
  792
  835
  879
  925
  974
  1,025
  1,078

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,634
  1,807
  1,988
  2,177
  2,375
  2,580
  2,794
  3,017
  3,248
  3,489
  3,739
  3,998
  4,268
  4,549
  4,841
  5,145
  5,461
  5,791
  6,134
  6,492
  6,866
  7,256
  7,663
  8,088
  8,532
  8,997
  9,483
  9,991
  10,523
  11,080
Adjusted assets (=assets-cash), $m
  1,634
  1,807
  1,988
  2,177
  2,375
  2,580
  2,794
  3,017
  3,248
  3,489
  3,739
  3,998
  4,268
  4,549
  4,841
  5,145
  5,461
  5,791
  6,134
  6,492
  6,866
  7,256
  7,663
  8,088
  8,532
  8,997
  9,483
  9,991
  10,523
  11,080
Revenue / Adjusted assets
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
Average production assets, $m
  1,109
  1,227
  1,350
  1,478
  1,612
  1,752
  1,897
  2,048
  2,205
  2,368
  2,538
  2,714
  2,898
  3,088
  3,286
  3,493
  3,707
  3,931
  4,164
  4,407
  4,661
  4,925
  5,202
  5,490
  5,792
  6,107
  6,437
  6,782
  7,144
  7,522
Working capital, $m
  -279
  -308
  -339
  -371
  -405
  -440
  -477
  -515
  -554
  -595
  -638
  -682
  -728
  -776
  -826
  -877
  -931
  -988
  -1,046
  -1,107
  -1,171
  -1,237
  -1,307
  -1,379
  -1,455
  -1,534
  -1,617
  -1,704
  -1,795
  -1,890
Total debt, $m
  60
  122
  186
  254
  324
  397
  473
  552
  635
  720
  809
  902
  998
  1,098
  1,202
  1,310
  1,423
  1,540
  1,662
  1,790
  1,923
  2,061
  2,206
  2,358
  2,516
  2,681
  2,854
  3,035
  3,225
  3,423
Total liabilities, $m
  582
  643
  708
  775
  845
  919
  995
  1,074
  1,156
  1,242
  1,331
  1,423
  1,520
  1,619
  1,723
  1,832
  1,944
  2,062
  2,184
  2,311
  2,444
  2,583
  2,728
  2,879
  3,038
  3,203
  3,376
  3,557
  3,746
  3,945
Total equity, $m
  1,052
  1,164
  1,280
  1,402
  1,529
  1,662
  1,800
  1,943
  2,092
  2,247
  2,408
  2,575
  2,749
  2,930
  3,118
  3,313
  3,517
  3,729
  3,950
  4,181
  4,422
  4,673
  4,935
  5,209
  5,495
  5,794
  6,107
  6,434
  6,777
  7,136
Total liabilities and equity, $m
  1,634
  1,807
  1,988
  2,177
  2,374
  2,581
  2,795
  3,017
  3,248
  3,489
  3,739
  3,998
  4,269
  4,549
  4,841
  5,145
  5,461
  5,791
  6,134
  6,492
  6,866
  7,256
  7,663
  8,088
  8,533
  8,997
  9,483
  9,991
  10,523
  11,081
Debt-to-equity ratio
  0.060
  0.100
  0.150
  0.180
  0.210
  0.240
  0.260
  0.280
  0.300
  0.320
  0.340
  0.350
  0.360
  0.370
  0.390
  0.400
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
Adjusted equity ratio
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  168
  185
  202
  220
  239
  259
  279
  300
  322
  345
  378
  403
  429
  455
  483
  512
  542
  574
  606
  640
  676
  713
  752
  792
  835
  879
  925
  974
  1,025
  1,078
Depreciation, amort., depletion, $m
  118
  129
  141
  153
  166
  179
  193
  208
  223
  238
  242
  259
  276
  294
  313
  333
  353
  374
  397
  420
  444
  469
  495
  523
  552
  582
  613
  646
  680
  716
Funds from operations, $m
  287
  314
  343
  374
  405
  438
  472
  508
  545
  583
  620
  661
  705
  749
  796
  845
  895
  948
  1,003
  1,060
  1,120
  1,182
  1,247
  1,315
  1,386
  1,461
  1,539
  1,620
  1,705
  1,794
Change in working capital, $m
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -95
Cash from operations, $m
  315
  344
  374
  406
  439
  473
  509
  546
  584
  624
  662
  706
  751
  797
  846
  897
  949
  1,004
  1,061
  1,121
  1,184
  1,249
  1,317
  1,388
  1,462
  1,540
  1,621
  1,707
  1,796
  1,889
Maintenance CAPEX, $m
  -95
  -106
  -117
  -129
  -141
  -154
  -167
  -181
  -195
  -210
  -226
  -242
  -259
  -276
  -294
  -313
  -333
  -353
  -374
  -397
  -420
  -444
  -469
  -495
  -523
  -552
  -582
  -613
  -646
  -680
New CAPEX, $m
  -113
  -117
  -123
  -128
  -134
  -140
  -145
  -151
  -157
  -163
  -170
  -176
  -183
  -191
  -198
  -206
  -215
  -224
  -233
  -243
  -254
  -265
  -276
  -289
  -302
  -315
  -330
  -345
  -361
  -378
Cash from investing activities, $m
  -208
  -223
  -240
  -257
  -275
  -294
  -312
  -332
  -352
  -373
  -396
  -418
  -442
  -467
  -492
  -519
  -548
  -577
  -607
  -640
  -674
  -709
  -745
  -784
  -825
  -867
  -912
  -958
  -1,007
  -1,058
Free cash flow, $m
  107
  121
  134
  149
  164
  180
  197
  214
  232
  251
  267
  288
  309
  331
  354
  377
  402
  427
  454
  482
  510
  540
  571
  604
  638
  673
  710
  748
  789
  831
Issuance/(repayment) of debt, $m
  58
  62
  64
  67
  70
  73
  76
  79
  82
  86
  89
  92
  96
  100
  104
  108
  113
  117
  122
  127
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  58
  62
  64
  67
  70
  73
  76
  79
  82
  86
  89
  92
  96
  100
  104
  108
  113
  117
  122
  127
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
Total cash flow (excl. dividends), $m
  165
  182
  199
  216
  234
  253
  273
  293
  315
  337
  356
  380
  405
  431
  458
  485
  514
  545
  576
  609
  643
  679
  716
  755
  796
  838
  883
  929
  978
  1,029
Retained Cash Flow (-), $m
  -107
  -111
  -117
  -122
  -127
  -132
  -138
  -143
  -149
  -155
  -161
  -167
  -174
  -181
  -188
  -196
  -204
  -212
  -221
  -231
  -241
  -251
  -262
  -274
  -286
  -299
  -313
  -327
  -343
  -359
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  58
  71
  82
  94
  107
  121
  135
  150
  166
  182
  195
  213
  231
  250
  270
  290
  311
  332
  355
  378
  403
  428
  454
  481
  510
  539
  570
  602
  635
  670
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  56
  65
  72
  78
  83
  88
  91
  94
  95
  95
  93
  91
  88
  84
  79
  74
  68
  61
  55
  48
  42
  36
  30
  25
  20
  16
  12
  9
  7
  5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Texas Roadhouse, Inc. is a restaurant company, which operates in the casual dining segment. The Company offers an assortment of seasoned and aged steaks, all cooked over open grills and all but one hand cut daily on the premises. Its restaurants offer a range of menu items at prices that are designed to appeal to a range of consumer tastes. The Company also offers its guests a selection of ribs, fish, seafood, chicken, pork chops, pulled pork and vegetable plates, and an assortment of hamburgers, salads and sandwiches. The Company offers an assortment of wings, sandwiches, pizzas and burgers, including its bacon grind patty. In addition, the Company also offers its guests a selection of chicken, beef, fish and seafood. Other menu items include specialty appetizers, such as the Cactus Blossom and Rattlesnake Bites. As of December 27, 2016, the Company had 23 franchisees that operated 86 Texas Roadhouse restaurants in 23 states and six foreign countries.

FINANCIAL RATIOS  of  Texas Roadhouse, Inc. (TXRH)

Valuation Ratios
P/E Ratio 38
Price to Sales 2.2
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 17.1
Price to Free Cash Flow 47.9
Growth Rates
Sales Growth Rate 10.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.6%
Cap. Spend. - 3 Yr. Gr. Rate 8.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 7.1%
Total Debt to Equity 7.1%
Interest Coverage 173
Management Effectiveness
Return On Assets 10.5%
Ret/ On Assets - 3 Yr. Avg. 10.1%
Return On Total Capital 15.5%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 16.3%
Return On Equity - 3 Yr. Avg. 15.4%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 66.4%
Gross Margin - 3 Yr. Avg. 65.3%
EBITDA Margin 12.9%
EBITDA Margin - 3 Yr. Avg. 12.3%
Operating Margin 8.6%
Oper. Margin - 3 Yr. Avg. 8.3%
Pre-Tax Margin 8.6%
Pre-Tax Margin - 3 Yr. Avg. 8.3%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 29.7%
Eff/ Tax Rate - 3 Yr. Avg. 29.8%
Payout Ratio 44.8%

TXRH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TXRH stock intrinsic value calculation we used $2457 million for the last fiscal year's total revenue generated by Texas Roadhouse, Inc.. The default revenue input number comes from 0001 income statement of Texas Roadhouse, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TXRH stock valuation model: a) initial revenue growth rate of 11.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TXRH is calculated based on our internal credit rating of Texas Roadhouse, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Texas Roadhouse, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TXRH stock the variable cost ratio is equal to 91.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for TXRH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Texas Roadhouse, Inc..

Corporate tax rate of 27% is the nominal tax rate for Texas Roadhouse, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TXRH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TXRH are equal to 40.6%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Texas Roadhouse, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TXRH is equal to -10.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $945.569 million for Texas Roadhouse, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 71.680 million for Texas Roadhouse, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Texas Roadhouse, Inc. at the current share price and the inputted number of shares is $4.5 billion.

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