Texas Roadhouse (NASDAQ: TXRH) operates a full-service, casual dining chain of 278 restaurants in 44 states. Outlets are decorated in a southwestern theme and feature steaks, ribs, chicken, and seafood. The chain is ranked 38th on the Forbes Best 200 Small Companies List and has been ranked first in the Pub/Grill category by readers of Consumer Reports.

The firm pleased investors late last month, when it reported Q3 EPS of 14 cents and revenues of $189.5 million. Analysts had been looking for 13 cents and $189.3 million. Management also offered FY07 EPS guidance of "at least" 53 cents (53 cent consensus) and said that FY08 earnings would grow by about 20%. CIBC subsequently remarked that the firm's solid report and positive outlook stood out in a casual dining landscape littered with earnings and guidance disappointments. TXRH shares popped on the news and have since been consolidating the gain in a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the stock with six "strong buys," five "buys" and two "holds." Analysts see a 22% average annual growth rate, through the next five years. The TXRH PEG ratio (1.08), Price to Sales ratio (1.30), Price to Book ratio (2.54), Price to Cash Flow ratio (13.49), Sales Growth rate (27.61%), EPS Growth rate (40.0%) and Return on Assets (8.66%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 68% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $10.51 and $16.05. A stop-loss of $10.40 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.