Texas Roadhouse Is A Long-Term Market Share Winner, But Remains Susceptible To Industry Headwinds

Canaccord Genuity analysts Lynne Collier and Philip May believe that Texas Roadhouse Inc (NASDAQ: TXRH) could be a market share winner in the long term. However, the company is vulnerable to broader industry headwinds.

The brokerage said the company enjoys a good brand value by offering superior price and value apart from services. The lead analyst is confident that these favorable factors will drive the company to add traffic beyond what the industry generates. Therefore, Canaccord Genuity rates Texas Roadhouse at Hold with a price tag of $48.

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Texas Roadhouse delivered $0.02 a share more than the Street analysts' estimate of $0.45 in the second quarter. In the last four quarters, the company's EPS missed only once.

Canaccord said in its research note to clients, "However, we believe there is some near-term investor uncertainty as comps were less robust in June and July and higher labor could potentially offset the benefit of lower COGS in '17. Further, we believe the valuation, which is >2 multiple turns above its peer group and over one standard deviation above its long-term average, fully reflects the positive outlook."

The brokerage's price target reflected 6 percent potential upside based on 11x Canaccord's 2017 EBITDA projection of $302 million.

At time of writing, Texas Roadhouse was down slightly (0.15 percent) and trading at $45.38.

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