Welcome, highlighting my first stock! (TXRH - $15.05)

With the first post here on my blog I am highlighting a tasty stock. There are actually some stocks that I like better at this point but have gone up so much lately that I would not feel comfortable highlighting them to others. I will save those for the future if there is a pullback in their share price.

I first came to know Texas Roadhouse (symbol TXRH) in College Station, it was one of if not the most popular restaurant in town. Weekend nights would have at least an hour wait to get a table. So once I found it was a publicly traded company I was obviously very interested. I am always a big fan of looking at stocks of companies whose products I like. In this case I absolutely love the food at Roadhouse. Don't even get me started on their ribs or steaks or sides...sorry, I had to go get a snack out of the pantry. They have appealing food, an appealing atmosphere, always a lot of customers, what more could you ask for? Lets take a look at the numbers.

The shares closed today at a price of $15.05 with a market cap of $1.11 billion. It has a 52 week trading range of $12.75 - $19.13. A trailing P/E of 36 and a forward P/E of 26. One of my favorite checks when looking into a stock is to see what its forward P/E is relative to its 5 year expected earnings growth. All of which can be found easily on Yahoo! Finance. In this case it is expected to grow earnings at 24%. So its forward P/E to growth ratio is a little over 1 which I consider very undervalued for a high growth company like this. The company has very low debt and has slightly better operating margins then key competitor Darden Restaurants. But the key here is the expansion of the number of their restaurants. They have about 200 right now and are looking at more then doubling that in upcoming years.

As with all stocks there are going to be some negatives. They have a quarterly earnings report being released on Monday, May 1. Last quarter that they reported, they did not meet analysts estimates and the stock fell 2% the following day. Also the amount of shares sold short (people betting that the stock price will go down) has almost tripled in the last month, so there is a certain amount of negativity around the stock. But often times the best time to buy into a stock is when things are negative because it can bounce back quickly.

I think this a compelling case. Over the long term I think this a great growth story to be involved in. In the short term, especially before their report on Monday I can't say what will happen. I suspect the stock has not been doing well lately because people are worried that higher gasoline prices will cause people to eat out less. But how could you stay away from this place? If they have a good earnings report Monday or oil prices start to come back down to Earth, (or both) I think this stock should be heading back to $19. Looking at various indicators I don't think this stock can go below $14 but could be well above $20 by the end of the year. That is the kind of risk/reward ratio that I like to see.

I do not own any shares of this stock and obviously these are just my thoughts not a recomendation to buy.