Here is a great company worthy to be on your watchlist. (Texas Road House, TXRH)

Texas Road House (TXRH) is a great company worthy to be on your watchlist. **It isn't in value territory yet so i wouldn't recommend you to buy it just yet.** But there is a shortage of USDA Beef today that is likely to persist until 2027 (since 2025) at the earliest, so there lies the opportunity. A company with an owner mindset will see this "trouble" as an opportunity to take market share away from the other chains (Outback, Longhorn) or from independent restaurants which has no choice but to pass on the 7% inflation onto customers. TXRH has so far increased the menu prices by a couple of % so while they have reported increased traffic, they have decreased the margins. In the last earnings call, Wall Street questioned TXRH on the wisdom of not increasing menu prices higher and preserving margins unlike its peers. And why TXRH diversify away from Beef. What is the moat of TXRH ? 1. **Value as a moat.** Instead of discounts, TXRH positions itself as a value restaurant. Its check size is on average $22 versus $28 of the peers. To increase affordibility, It is also located in non-city centre, usually in the suburban areas, near malls and high foot traffic areas. Can you think of another company that also emphasizes affordibility as the driving force ?(hint: think Costco) 2. **Owner-mindset as a moat.** TXRH works on a managing partner concept: rather than being promoted to a salaried general manager of a restaurant, the MP has to pay around 25k as an investment into the business, and in return he/she gets 10% of the monthly pre-tax profits the restaurants makes. The employment contract is 5 years. This aligns very well the incentives of this partial owner-operator to the success of the restaurants. I am going to skim the Catalysts for the stock because i believe knowing the risks first is more important than the gravy. (the catalysts are: Bubba's 33 going national (it competes with Buffalo Wild Wings) , and Jaggers increasing the franchise, and TXRH expanding internationally beyond the current 10 countries ). The risks are: * Beef inflation likely to persist into 2027, and TXRH does not do hedging. It is dependent on Beef. * Alcohol consumption is showing a bit of weakness in the last six month. **Valuation:** I have a start accumulating price of $145 and lower, based on a 7% earnings growth for the next 10 years starting from a base of $6.35 Lastly, i will leave this interesting chart, it shows how strong sales growth is compared to the industry and peers. | Period | Knapp-Track Index (Industry Avg) | Texas Roadhouse (TXRH) | Darden (DRI Total Portfolio) | Olive Garden (DRI Flagship) | | :--- | :--- | :--- | :--- | :--- | | Full Year 2024 | ~2.5% | 14.7% | ~6.8% | 0.8% | | Q1 2025 | ~1.4% | 8.4% | 6.2% | 0.6% | | Q2 2025 | ~2.0% | 9.3% | 7.3% | 1.1% | | Q3 2025 | ~1.8% | 6.1% | 4.3% | -1.5% | | Q4 2025 (Est) | ~2.2% | ~5.5% | ~4.5% | ~1.0% | | 2026 Outlook | ~2.0% | ~5.5% - 6.0% | ~3.0% - 4.0% | ~1.5% - 2.5% |