Insider buying can provide valuable trading signals. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
In this report, we are going to highlight some interesting insider buying at Texas Roadhouse Inc (TXRH:US). Texas Roadhouse is an American restaurant company that owns a number of brands including Texas Roadhouse, Bubba’s, and Jaggers. Founded in 1993, it now has nearly 700 restaurants in its portfolio. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $5.3 billion.
Texas Roadhouse Inc: Insider Buying
Our data shows that two board members at Texas Roadhouse have purchased company stock recently.
On May 20, director James Zarley bought 7,069 shares at a price of $70.56 per share. This trade cost the insider just under $500,000.
Then, on May 23, director Curtis Warfield bought 3,362 shares at a price of $71.03 per share. This trade cost the insider roughly $240,000.
Combined, the two board members spent about $740,000 on stock.
Large Purchases
This trading activity is worth highlighting for a couple of reasons. Firstly, both insiders have made substantial purchases. This suggests they are confident the stock is set to move higher.
Secondly, both insiders have increased the size of their holdings significantly with these trades. Our data shows that Mr. Warfield has increased the size of his position by 27% while Mr. Zarley has increased the size of his total holding by 7%.
Earnings Beat
Texas Roadhouse recently posted strong Q1 earnings that were ahead of expectations.
For the period, revenue came in at $987.49 million, up 23.3% year on year and above the consensus forecast of $971.50 million. Meanwhile, diluted earnings per share amounted to $1.08, up from $0.91 in the prior-year period, and above Wall Street’s forecast of $0.91. While restaurant margin decreased 213 basis points due to commodity inflation, this was offset by an increase in comparable restaurant sales.
During the quarter, the company opened five new restaurants including two international restaurants. It also repurchased 1.06 million shares of common stock for a total consideration of $85 million.
“Our healthy cash flow continues to allow us to grow our brands through new store development. We also repurchased over one million shares of our common stock this quarter, which is our most significant buyback since before the pandemic. We believe our new store growth, share buybacks and the continued growth in our dividends reflect the on-going commitment to our shareholders,” said CEO Jerry Morgan.
In light of these solid results, we see the insider buying here as a bullish indicator.
