Update on Texas Roadhouse (TXRH - $14.59)

Shares of Texas Roudhouse have fallen the last couple of days after the company reported their first quarter earnings results. The company earned 11 cents per share which was what analysts were expecting while revenue came in above what analysts were expecting. The only bad thing I can see is that 11 cents is 9% less income then earned in the first quarter of last year.

Now the ADD investor would look at that and say there is no growth here and move along. Not so fast my friends. Take your medication and lets look a little bit deeper. Revenue is actually up 35% from the same quarter a year ago. Thats a huge number but why did earnings not follow suit? Two major reasons: stock options expenses that did not exist in the first quarter of last year and most importantly pre restaurant opening expenses are much higher this time around. From their press release "Substantially more restaurants were in the development pipeline in the first quarter of 2006 versus the first quarter of 2005."

Wow, so you could actually make a case that they are growing much faster then they were last year. They are opening more and more restaurants. Earnings have not caught up to their revenue because they are spending the money on growing. That is a growth story that I like. With continous revenue growth of 35% I think the stock deserves to be trading over $21. I am confident more people will see this growth and it will get well above that this year.