Watch Out: Barbarians At The Gate For Texas Roadhouse (TXRH)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Texas Roadhouse ( TXRH) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Texas Roadhouse as such a stock due to the following factors:

  • TXRH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.0 million.
  • TXRH has traded 816,738 shares today.
  • TXRH traded in a range 206.2% of the normal price range with a price range of $1.24.
  • TXRH traded above its daily resistance level (quality: 38 days, meaning that the stock is crossing a resistance level set by the last 38 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on TXRH:

Texas Roadhouse, Inc., together with its subsidiaries, operates as a full-service restaurant company. The company operates its restaurants primarily under the Texas Roadhouse name. The stock currently has a dividend yield of 1.9%. TXRH has a PE ratio of 27. Currently there are 4 analysts that rate Texas Roadhouse a buy, no analysts rate it a sell, and 15 rate it a hold.

The average volume for Texas Roadhouse has been 573,600 shares per day over the past 30 days. Texas Roadhouse has a market cap of $2.5 billion and is part of the services sector and leisure industry. The stock has a beta of 1.13 and a short float of 6.8% with 6.88 days to cover. Shares are up 5.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Texas Roadhouse as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 39.25% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TXRH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • TEXAS ROADHOUSE INC has improved earnings per share by 24.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TEXAS ROADHOUSE INC increased its bottom line by earning $1.23 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $1.23).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 22.0% when compared to the same quarter one year prior, going from $26.47 million to $32.29 million.

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