Analysts Are Underestimating Texas Roadhouse Inc (TXRH)

One of the best ways to make money in the market is to do your homework on a company to the point that you can start questioning the analysts that follow the company. I tend to do this on a regular basis. I try to reason out if a company’s plans and analysts expectations for growth make sense. There is one company that has confounded the analysts for the last four quarters in a row, and it seems they may continue to surprise to the upside. The company I’m referring to is, Texas Roadhouse Inc (NASDAQ:TXRH).

Texas Roadhouse Inc (NASDAQ:TXRH)

You Would Never Know
What is particularly interesting about Texas Roadhouse Inc (NASDAQ:TXRH)’s recent earnings is, the company seemed to do well even though most of their competition struggled. In the last three months, unusual storms and temperatures hurt same-store sales at many chains. Companies like Buffalo Wild Wings (NASDAQ:BWLD) suggested the storms hurt their same-store sales, which were up just 1.4% compared to a 5.8% increase in the prior quarter.

Even more well established companies like Brinker International, Inc. (NYSE:EAT) and Darden Restaurants, Inc. (NYSE:DRI) struggled because of weather issues. Brinker’s same-store sales at Chili’s were down 1.1%. Darden saw a same-store sales decrease of 4.1% at Olive Garden, Red Lobster’s decline was 6%, and Longhorn Steakhouse saw a decline of 1.6%.

By comparison, Texas Roadhouse Inc (NASDAQ:TXRH) almost seemed to operate in a bubble. The company saw company-owned same-store sales increase 3.5% and franchise sales increased 4.5%. These strong same-store sales helped revenue to increase 11%, and diluted EPS was up 19.8%.

These 3 Numbers Suggest More Positive Results To Come
While earnings per share can be somewhat manipulated, I’ve found one measure that companies can’t alter too much. When comparing companies in the same industry, I use a measure called core operating cash flow. Core operating cash flow is simply the company’s net income plus depreciation. This figure eliminates some of the non-cash adjustments in the cash flow statement, and gives a good apples-to-apples comparison of how different companies are performing.

Based on core operating cash flow, Texas Roadhouse Inc (NASDAQ:TXRH) is outperforming their peers, and most by a wide margin. On a year-over-year basis, the weakest performer was Darden Restaurants, Inc. (NYSE:DRI), which saw a decrease in core operating cash flow of 1.97%. Brinker International, Inc. (NYSE:EAT) performed much better with an increase of 9.28%, and Buffalo Wild Wings (NASDAQ:BWLD) showed a big increase of 24.32%. Though Buffalo Wild Wings (NASDAQ:BWLD) came close, Texas Roadhouse Inc (NASDAQ:TXRH) reported a jump of 26.79% in core operating cash flow.