Market Overview

Looking Into Texas Roadhouse's Return On Capital Employed

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Texas Roadhouse (NASDAQ: TXRH) saw a drop in both earnings and sales after Q1. Earnings dropped to $15.21 million, a 71.66% decrease from the previous quarter. Sales fell to $652.52 million, down 10.03% from the previous quarter. In Q4, Texas Roadhouse earned $53.68 million and total sales reached $725.24 million.

What Is Return On Capital Employed?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed in a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth in a company and is a sign of higher earnings per share for shareholders in the future. A low or negative ROCE suggests the opposite. In Q1, Texas Roadhouse posted a ROCE of 0.01%.

Keep in mind, while ROCE is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or sales in the near future.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Texas Roadhouse is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital which will lead to higher returns and earnings per share growth. In Texas Roadhouse's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Upcoming Earnings Estimate

Analysts expect EPS to increase to $-0.63/share by the end of the quarter.

 

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