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Cooking Stock: TXRH

Barron's looks at Texas Roadhouse (TXRH):

At current levels they appear attractive, especially in light of the chain's strong growth prospects. Texas Roadhouse trades for 26 times next year's estimated earnings of 59 cents a share, which isn't quite a steal. But it might not be too much to pay for a stock that some observers think could be 25% to 35% higher by the end of the year and 60% higher by the end of next year.

Texas Roadhouse has 223 restaurants in 41 states, but hopes to expand to 800 to 1000 units. The restaurants offer "Joe the electrician and his family" meals with a home-cooked quality, with some items on the menu made from scratch.

With only 223 restaurants in 41 states, Texas Roadhouse has lots of growth potential. Eventually, it hopes to have 800 to 1,000 units across the country. About 24 restaurants are scheduled to open this year, compared with 20 in 2005.

The stock is up 80% for the year, and it seems our heads were too caught up in Darden (DRI) and Cheesecake Factory (CAKE) to even think about ribs.

Here's the problem: the steak space is saturated.

Ruth's Chris Steak House (RUTH) went public last year, and Morton's Restaurant Group (MRT) issued shares in January. The most dire and serious threat is Florida's Outback Steakhouse (OSI), Texas Roadhouse's biggest foe.

Texas Roadhouse could get cooked -- that must explain the 10% short interest.

posted by Catablast! Media Group @ 1:23 PM