Is Texas Roadhouse, Inc. overvalued or undervalued?

As of 8 May 2025, the valuation grade for Texas Roadhouse, Inc. has moved from expensive to very expensive, indicating a significant shift in its perceived value. The company is currently considered overvalued, with a P/E ratio of 29, which is notably higher than the industry average. Additionally, the EV to EBITDA ratio stands at 17.44, further supporting the notion of overvaluation.
In comparison to its peers, Texas Roadhouse's P/E ratio exceeds that of Darden Restaurants, Inc. at 24.86 and Yum China Holdings, Inc. at 17.01, which are both categorized as very expensive and expensive, respectively. The company's ROCE of 45.92% and ROE of 32.26% are impressive, but they do not sufficiently justify the high valuation metrics. Recent stock performance shows Texas Roadhouse has outperformed the S&P 500 over the long term, with a 3-year return of 156.20% compared to 58.74% for the index, yet the current valuation suggests caution for potential investors.