Wedbush On Texas Roadhouse: This Type Of Growth Shouldn't Be Possible

Investors looking for exposure in the restaurant sector are hard pressed to find a standout that boasts spectacular growth rates, but analysts at Wedbush found one: Texas Roadhouse Inc TXRH.

The Analyst

Wedbush's Nick Setyan initiated coverage of Texas Roadhouse's stock with an Outperform rating and $67 price target.

The Thesis

Texas Roadhouse isn't only a standout in the casual restaurant sector, but is boasting growth rates that's "no longer supposed to be possible," Setyan said in a note. Perhaps the most notable factor working its favor is that the company stands out as a "unique" Texas steakhouse themed restaurant in an overcrowd competitive landscape.

The Texas steakhouse themed restaurant has 15 straight quarters of positive transaction growth. Same-store sales growth has outperformed by the casual dining sector by an average of 450 basis points and the industry as a whole by 330 basis points.

Meanwhile, first-hand checks suggests Texas Roadhouse's fourth quarter will be more of the same as same-store sales are likely to come in slightly above the Street's 5.4 percent consensus estimate, according to Setyan. As such, the continued momentum and attractive unit economics should give investors confidence that the company is "immune" in the event of an industry-wide slowdown.

Price Action

Shares of Texas Roadhouse hit a new all-time high of $58.55 Friday.

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