Texas Roadhouse Inc (TXRH): Will Store Expansion Help This Restaurant Company Grow?

Brinker International, Inc. (NYSE:EAT) has invested in technology for growth. The company has invested in new kitchen technology to make a “kitchen of the future” and point-of-sale Ziosk tabletop technology. The new kitchen technology has helped it to offer new product lines including pizza and flatbread dishes in its restaurants. At the same time, these technologies will help the company to reduce food waste and labor charges. The Ziosk tabletop technology will enhance the in-store customer experience, allowing for smooth ordering and an easier payment process. It will also enable the company to have more advertising and promotional opportunities inside of its stores. Brinker is reimagining its Chili’s brand and is also renovating 40% of its company-owned stores. The reimagined stores are performing around 3% better in same-store sales than untouched stores. The technological enhancement efforts and reimaging are expected to give good results.

Source: Google Finance and Yahoo! Finance

Texas Roadhouse Inc (NASDAQ:TXRH) has reported an operating margin of 10.61% but reports the highest forward price-to-earnings ratio among the three mentioned peers at 18.69. Darden Restaurants, Inc. (NYSE:DRI) has the lowest price-to-sales ratio at 0.75, but also has the lowest operating margin of 9.42%. Brinker International, Inc. (NYSE:EAT) has performed the best among the peers, reporting the highest operating margin at 10.68% and lowest forward price-to-earnings ratio at 14.73.

Conclusion

Texas Roadhouse Inc (NASDAQ:TXRH) has store growth plans in place and has entered into two new states this year to increase its presence to 49 states. A menu price increase is expected in the latter part of the year to marginalize the food inflation effect on its margin. Its store-level initiatives of extra seats at peak time and local marketing are expected to increase the company’s sales in the long term. As a result, I would recommend “BUY” for this stock. In addition to Texas Roadhouse Inc (NASDAQ:TXRH), I would also recommend that investors consider Brinker International, Inc. (NYSE:EAT) as an investment. I have discussed my bullish thesis on the company in my previous article here.

The article Will Store Expansion Help This Restaurant Company Grow? originally appeared on Fool.com.

Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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