With a market cap of $12.03 billion and current share price of $380, Chipotle Mexican Grill (CMG) is a fast-growing company that offers what it calls “Food with Integrity.” Chipotle has been successful, because it offers healthy high-quality food, in a fast and efficient manner. Chipotle’s success has made many investors a lot of money. Over the last three years the stock price has increased by 377%. It is obvious that investors like Chipotle’s growth potential and have been willing to pay up. Chipotle’s price-to-earnings ratio is 52.19 and its price-to-book ratio is 10.47. These are exceeding high price multiples for a restaurant stock. As a result of the high multiples, some analyst have the opinion that Chipotle is overvalued, and that any bad news will cause the stock price to crash. So far these types of dismal analyst predictions have been wrong. While it is true that Chipotle’s stock has had some bad days, the company’s long-term stock price has held up pretty well. Over the last year the stock price is up by 16.7%.
Despite Chipotle’s high price, investors have continued to support the stock because of its above-average growth. Chipotle has had seven quarters of double-digit same-store sales growth, and in the first quarter it increased same-store sales by 12.7%. In addition the company increased first-quarter year-over-year revenue by 25.7% and first-quarter year-over-year net income by 35%. Chipotle currently has 1,230 restaurants, and in the first quarter it opened 32 new restaurants.
Despite the fact that Chipotle’s is still growing at a remarkable rate, I have reservations about investing in its stock.To continue reading, click here.