How High Can Chipotle Mexican Grill Fly?

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Shares of Chipotle Mexican Grill (NYS: CMG) hit a 52-week (and all-time) high recently. Let's look at how it got here and whether clear skies are ahead.

How it got here
This longtime Rule Breaker keeps marching higher, rain or shine. Shares almost never pull back in any meaningful way, but if they ever did, fellow Fool Alyce Lomax would pounce all over it in a heartbeat, since it's on her watchlist (add it to yours, too, by clicking here).

A couple months ago, the burrito roller put up a strong fourth quarter to close out its full-year 2011. Chipotle opened 67 new restaurants in the quarter, bringing its total to 1,230. European expansion is just now beginning, with last year seeing the first two locations in the region.


The company's focus on "Food With Integrity" has led to incredibly strong brand loyalty, which helps it pass on rising commodity costs to regular diners who are willing to pay up to chow down. There are plenty of regulars, too, with comparable store sales growth accelerating over the years.

Chipotle got here simply because its business is rock-solid and just keeps on growing.

How it stacks up
Let's see how Chipotle stacks up with some of its casual-dining peers.

CMG Chart

 

CMG data by YCharts

For additional insight, we'll toss in a few fundamental metrics.

Company

P/E (TTM)

EPS Growth (5-Year Rate)

Net Margin (TTM)

ROE (TTM)

Chipotle62.539.6%9.5%23.2%
Yum! Brands (NYS: YUM) 25.613.4%10.6%77.6%
Panera Bread35.321.6%7.5%21.7%
Jack in the Box (NAS: JACK) 18.11.7%2.8%13.0%
Buffo Wild Wings31.624.2%6.4%17.6%

Source: Reuters. TTM = trailing 12 months.

Chipotle's lofty valuation looks rather justified, considering its far-superior profit growth over the past five years. In addition, one major reason why Yum!'s return on equity is so much higher is because it's working with a smaller equity base and utilizes more leverage than Chipotle. Yum! has a debt-to-equity ratio of 3.6 compared to Chipotle's 0.36 -- 10 times more leverage.

The company looks much better than Jack in the Box, owner of direct competitor Qdoba Mexican Grill, and boasts much higher quality food than Yum!'s Taco Bell Mexican eatery.

What's next
Chipotle has a lot going for it, so long as you can stomach its premium valuations along with its burrito bowls. Considering the boundless international growth opportunities and incredible business momentum it has, I think Chipotle is cleared for take-off.

Interested in more info on Chipotle Mexican Grill? Add it to your watchlist by clicking here.

At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Buffalo Wild Wings, Chipotle Mexican Grill, and Panera Bread.Motley Fool newsletter serviceshave recommended buying shares of Yum! Brands, Panera Bread, Chipotle Mexican Grill, and Buffalo Wild Wings.Motley Fool newsletter serviceshave recommended creating a bear put spread position in Chipotle Mexican Grill.Motley Fool newsletter serviceshave recommended writing covered calls on Buffalo Wild Wings. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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