Index inclusions put Texas Roadhouse in focus

Texas Roadhouse (TXRH) has been added to a series of Russell value indices, including the Russell 1000 Value and Russell 3000 Value, a shift that can influence index-tracking fund flows and investor attention.

For you as an investor, these index changes matter because many passive products and rules-based portfolios are required to hold constituents of their benchmarks. When a stock is added, managers who follow those indices often adjust positions to align with the new composition.

Texas Roadhouse now features in several benchmarks, including the Russell 3000 Value, Russell 3000E Value, Russell Midcap Value, Russell Small Cap Comp Value, Russell 2500 Value, and the Russell 1000 Value and Russell 1000 Value Defensive indices.

The recent Russell index additions come at a time when Texas Roadhouse has seen strong momentum, with a 19.04% 90 day share price return and a 5 year total shareholder return of 124.43% pointing to sustained investor interest.

If this kind of momentum has you thinking about what else is moving, it could be a good moment to broaden your search and uncover 20 top founder-led companies

After a strong 90 day share price return and index additions that highlight Texas Roadhouse as a value stock, the key question for you is whether today’s valuation still leaves upside on the table or whether the market is already pricing in future growth.

Most Popular Narrative: 0% Overvalued

On the most followed valuation narrative, Texas Roadhouse is priced slightly above its fair value estimate of $196.04, with the last close at $196.59. The gap is narrow but meaningful for valuation focused investors.

Analysts are assuming Texas Roadhouse's revenue will grow by 9.0% annually over the next 3 years. Analysts assume that profit margins will increase from 6.8% today to 7.7% in 3 years time.

Want to understand what supports that near fair value call? The narrative leans on steady revenue gains, rising margins, and a future earnings multiple that has to hold up. The exact mix of those assumptions is where the story gets interesting.

Result: Fair Value of $196.04 (ABOUT RIGHT)

However, Texas Roadhouse still faces pressure from beef inflation and rising wages, which could squeeze margins if menu pricing and traffic do not keep pace.

Another View on Texas Roadhouse Valuation

While analyst targets put Texas Roadhouse roughly in line with a fair value of about $196, the SWS DCF model points to a higher estimate of $214.24, with the stock trading at an 8.2% discount to that figure. If cash flows are right, is the market being a bit cautious here?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Texas Roadhouse for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With Texas Roadhouse showing both potential rewards and clear risks, it makes sense to move quickly and test the numbers yourself. To weigh both sides of the story and see how the trade off looks for you, take a closer look at the 2 key rewards and 2 important warning signs

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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.