Investors often turn to strong growth stocks, holding the title to form the core of their portfolios. That’s why companies like Nvidia, Alphabet and other members of the Magnificent Seven command a lot of attention.
But because they are volatile in nature, the greatest strength of technology stocks is matched by their potential for great losses. That may make them a poor fit for people nearing retirement or investors who can’t tolerate high-risk, high-reward investments.
Conversely, under-the-radar stocks operating in below-average industries can often provide stability, consistency and consistent returns to buy-and-hold investors.
Texas Roadhouse (TXRH) is a perfect example. Since bringing in a new CEO five years ago, the company’s stock has outperformed Chipotle ( CMG ) and McDonald’s ( MCD ) combined. Here’s how it grew from its Midwest roots to a modern portfolio staple.
How a new CEO turned Texas Roadhouse into the greatest restaurant ever
Outside of its Lone Star State brand, the 33-year-old restaurant’s first location opened in Clarksville, Indiana. Texas Roadhouse held its initial public offering (IPO) in October 2004, and its stock has gained more than 1,255% since then.
Since the end of the pandemic, it has generated double the returns it did 16 years ago since its IPO. In just the past five years, shares of Texas Roadhouse have gained 49%, besting Chipotle (12%) and McDonald’s (21%) – together – over the same period.
The consumer discretionary sector, in which Texas Roadhouse falls, is highly cyclical. When inflation erodes purchasing power and consumer confidence weakens, dining out becomes a luxury for many. But as the broader restaurant industry faces a downturn, Texas Roadhouse has figured out how to save the sidewalks.
Same-store sales are a metric that measures year-to-year revenue changes for established business locations. For chain restaurants, same-store sales growth averaged 2.3%. For Texas Roadhouse, it’s 8.3%.
A large part of that success involves a modern strategy that was established in March 2021 when the company’s current CEO, Jerry Morgan, stepped into the role. Morgan’s efficiency measures have been critical to Texas Roadhouse’s strong performance over the past five years.
Examples include the use of tablets to enable tableside payment and tipping, the transition to a digital kitchen display system, and accurate app wait times. The company also adopts a partner management model that gives local operators equity in Texas Roadhouse locations without the traditional cash sale.
Perhaps most importantly, as McDonald’s fixed-price $1 menu items have disappeared and Chipotle bowls are closer to $15, Texas Roadhouse has been able to keep prices affordable. According to the Texas Roadhouse website, menu items at Outback Steakhouse and LongHorn Steakhouse are between 10% and 20% off.
Result: By 2024, Texas Roadhouse became the largest US restaurant by sales, surpassing Olive Garden, Chili’s and Applebee’s.
The numbers don’t lie
Expansion played a major role in revenue. Texas Roadhouse is in the midst of a long-term plan to reach 900 shelters, an increase from Morgan’s previous goal of 700–800. With 744 locations currently, the company averages between 30 and 35 new restaurants per year.
That translated into an annual revenue growth rate of over 20%. For chain restaurants, 3% to 5% is considered desirable. Texas Roadhouse has only missed the revenue expected by analysts once in the last 12 quarters.
Since Morgan took over, the company has also seen increased revenue growth (aka profits). By 2021, that number stood at $245 million; by the end of 2024, it had reached a record $434 million. Even in 2025 amid dwindling consumer confidence, a slowdown in tax policy and record beef prices, Texas Roadhouse managed to generate $406 million in profits.
Another notable sign of its long-term strength is institutional ownership — the percentage of shares owned by so-called “smart money,” which includes asset management firms, mutual funds and investment banks.
For a typical S&P 500 company, that figure is about 75%. At Texas Roadhouse, institutional ownership is approximately 95%.
The stock is also attractive to inbound investors. paid a dividend of 1.9% or $3 per share annually. But more impressively, its distribution is increasing. Texas Roadhouse has a five-year annualized dividend growth rate of nearly 50%, and has increased its payout for six consecutive years.
Interested in adding Texas Roadhouse to your portfolio? After doing your own due diligence, you can gain direct exposure by owning individual stocks or gain indirect exposure by sector or by subject exchange-traded funds (including iShares Core Dividend Growth ETF or State Street Consumer Discretionary Select SPDR ETF).
