BMO Capital Markets initiated coverage on Texas Roadhouse Inc. TXRH in a report issued Thursday with a Market Perform rating and $29 price target.
Analyst Andrew Strelzik believed that "Texas Roadhouse should generate low double-digit sales growth and at least mid-teens earnings growth for the foreseeable future beginning in 2015.”
Strelzik cautioned that “investors should wait for a more attractive entry point, in our view, as Texas Roadhouse likely will fall short of expectations over the next 18 months.”
The report noted that the company "is trading at a forward 12-month P/E and EV/EBITDA of 20x and 9.0x-9.5x, respectively, is trading largely in line with its historical average P/E multiple and above its historical average EV/EBITDA multiple (8.3x).”
Beef inflation was a significant factor for the company. The report estimated that a 10 percent decline in beef prices “could contribute $25-30 million of profits, 150 basis points to margins, and $0.25 to EPS.”
Texas Roadhouse Inc. recently traded at $27.78 Thursday, down 0.82 percent.
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