Texas Roadhouse Inc (TXRH), Buffalo Wild Wings (BWLD): Four Numbers Say This Company Could Miss Estimates This Year

Relative to Texas Roadhouse’s two fast growing competitors, Brinker and Buffalo Wild Wings (NASDAQ:BWLD), the company’s lower margin spells trouble. Buffalo Wild Wings (NASDAQ:BWLD) operating margin is 7.7%, and Brinker managed a margin of 8.93%. With each of these companies expected to grow faster than Texas Roadhouse, investors might be tempted to switch.

If Texas Roadhouse’s lower margin was accompanied by strong revenue growth, bottom line EPS growth might not be an issue. However, I’m beginning to question what type of top line growth the company can realize.

For full year 2013, analysts expect Texas Roadhouse to grow revenue by 10.4%. The company said it expects to open about 28 new restaurants during the year, on top of the 392 already in operation. This means new store growth should contribute about 7.14% to revenue growth. The troubling thing is the company only said they expect “positive comps.” To meet analysts’ estimates for revenue growth, the company will have to achieve at least 3.26% growth from either more guests, or through price increases.

Better Opportunities
It seems like there are better opportunities for investors at the current time. Texas Roadhouse’s shares sell for over 18 times projected earnings, and it seems clear that the company may run into challenges to meet the 13.67% EPS growth analysts expect.

It’s tough to recommend Darden, even with its 3.88% yield, but Buffalo Wild Wings (NASDAQ:BWLD) and Brinker are a different story. Buffalo Wild Wings has better margins than Texas Roadhouse, and while the company doesn’t pay a dividend, they are expected to grow much faster at 19.11%.

Brinker beats Texas Roadhouse by nearly every measure. The company pays a higher yield at 2.12% versus 1.85%. Analysts expect slightly better growth at 13.84% versus 13.67%. Additionally, while Texas Roadhouse’s share count is growing, Brinker has been busy shrinking its shares. In the end, investors who like restaurant stocks should probably consider trading some Texas sized challenges for a red hot Chili’s.

The article 4 Numbers Say This Company Could Miss Estimates This Year originally appeared on Fool.com and is written by Chad Henage.

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