Still Salivating Over Chipotle

This article is part of ourRising Star Portfolio series.

Darn it, Chipotle (NYS: CMG) ! Any investors who were hoping for a majorly discounted stock price to present itself after Chipotle's earnings report were as disappointed as I was.

Chipotle's first-quarter net income increased 23.7% to $57.5 million, or $1.81 per share. Analysts had expected earnings of $1.83 per share for the quarter. Revenue increased by 23.7% to $596.7 million, and same-restaurant sales surged an extremely impressive 11.1%.

In keeping with themes recently displayed at fast-food rivals like McDonald's (NYS: MCD) and Starbucks (NAS: SBUX) , Chipotle faced rising commodity costs. It managed to improve restaurant-level operating margin by 20 basis points to 26.1%, even though food costs increased 120 basis points to 32.2% of sales. However, like McDonald's and Starbucks, Chipotle has the brand strength to pass on these price increases and greatly minimize the damage.

Chipotle's shares weakened a bit after the report, which we also covered here, but the stock's still flirting with its 52-week high. It's incredibly difficult to bring oneself to buy a burrito restaurant stock that's trading at 34 times forward earnings and sports a PEG ratio of 1.94.

I've been eyeing this stock for the socially responsible Rising Stars portfolio I manage for Its "Food with Integrity" mission, which includes the use of organic and natural ingredients when at all possible, would make it an excellent fit. In November, I bought shares of Darden Restaurants (NYS: DRI) for the portfolio, but that pick reflected both corporate social responsibility initiatives and a cheap stock price.

It may be misguided to anchor too firmly on Chipotle's high multiples given its potential. As far as Chipotle's high stock price goes, I've often mulled the notion that this company faces great growth prospects because of its resemblance to another stock I've bought for that portfolio, Whole Foods Market (NYS: WFM) .

Just like it's a mistake to think of Whole Foods as "just another grocery stock" or Starbucks (also present in the portfolio) as "just another coffee stock," Chipotle is more than just another fast-food restaurant stock. All of these companies have more-lofty ideals built into their businesses beyond simply making profits.

Chipotle's also testing out ShopHouse Southeast Asian Kitchen in the Washington, D.C. market, a concept that's "well-received," although management won't reveal whether it has plans to open more locations in other markets. Chipotle's also opening stores in overseas markets like London, Paris, and Germany, adding more food for thought when it comes to future growth that could make today's stock price far more palatable.

So I'm left salivating over Chipotle while fretting about the high multiples; it's firmly on my Watchlist, though. Would you buy now, or wait? Add your thoughts in the comments box below.

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At the time thisarticle was published Alyce Lomaxowns shares of Whole Foods Market and Starbucks in her personal portfolio.The Motley Fool owns shares of Whole Foods Market, Darden Restaurants, Starbucks, and Chipotle Mexican Grill.Motley Fool newsletter serviceshave recommended buying shares of Starbucks, Chipotle Mexican Grill, Whole Foods Market, and McDonald's. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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