It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Texas Roadhouse (NASDAQ:TXRH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Texas Roadhouse with the means to add long-term value to shareholders.
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Texas Roadhouse's EPS has grown 23% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Texas Roadhouse achieved similar EBIT margins to last year, revenue grew by a solid 16% to US$5.4b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
NasdaqGS:TXRH Earnings and Revenue History April 20th 2025
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. Given insiders own a significant chunk of shares, currently valued at US$54m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.
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. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Texas Roadhouse, with market caps over US$8.0b, is about US$14m.
Texas Roadhouse's CEO took home a total compensation package of US$6.2m in the year prior to December 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does Texas Roadhouse Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Texas Roadhouse's strong EPS growth. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes Texas Roadhouse look rather interesting indeed. Before you take the next step you should know about the 1 warning sign for Texas Roadhouse that we have uncovered.
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.
