There May Never Be Another Chipotle

Once again, Chipotle Mexican Grill (CMG) is reminding us that it's the rock star in the growing realm of fast-casual eateries. The market may not have warmed up to the chain's latest quarterly results, but it's ultimately another period of healthy double-digit growth on both ends of the income statement.
The 1,783-unit chain generated $1.07 billion in revenue, up 27 percent since the prior year's holiday quarter. Expansion and a 16.1 percent spike in comparable-restaurant sales fueled the heady top-line gains. Earnings grew even faster, overcoming an uptick in food costs to deliver a profit of $3.84 a share, up 52 percent from a year earlier.

Chipotle's outlook for 2015 didn't wow the market. Chipotle expects comparable-restaurant sales to climb in the low-to-mid single digits. However, this was exactly what Chipotle said back in October when it reported its third-quarter results. One can argue that the only reason the stock is taking a hit after another quarter of strong growth is that the shares had soared nearly 20 percent since the day after it offered up its third-quarter results three months ago. That's a lot of helium, ripe for a correction if Chipotle doesn't live up to its historical tendency of boosting its guidance at most quarterly checkpoints.

Life After Chipotle

The lines at Chipotle are long, but they move pretty fast. The chain's signature assembly line and speedy checkouts keep the queues going at a steady clip. However, from time to time, the lines are too long for some hungry patrons to wait out. They walk away, only to realize that they still need to find a place to eat.

That's when they have to settle for less, and that's exactly where investors bailing on Chipotle find themselves now. They sold the stock, but it's going to be hard to find another eatery investment that has the cult-fave appeal of Chipotle. They certainly aren't going to find a publicly traded restaurant that saw the average store sell 16.1 percent more than it did a year earlier, much less a chain of its size with the confidence to open another 190 to 205 new restaurants this year.

%VIRTUAL-WSSCourseInline-908%Punch in "the next Chipotle" in an online search and you'll get an assortment of bold prognostications that failed to pan out.

Noodles & Co. (NDLS) went public at $18 two years ago, and it was billed as fast-casual's response to pasta. The fast-growing chain offering noodles in several international cuisine varieties was hot out of the gate, nearly tripling when it peaked a few days later. However, the stock has gone on to shed nearly half of its value as sluggish restaurant-level performance suggests that quality pasta isn't a scintillating draw.

Several burrito rollers have been hailed as the next Chipotle, and Qdoba -- owned by Jack in the Box (JACK) -- is one of the closest in terms of size, with 638 locations. Comps rose a respectable 6 percent at Qdoba in fiscal 2014, but that came after a mere 0.8 percent uptick in fiscal 2013. Jack in the Box sees comparable-restaurant sales at Qdoba climbing 6 percent to 8 percent in fiscal 2015. That may be better than Chipotle's own guidance, but Qdoba locations still generate lower sales. Either way, for investors, buying into Qdoba means also buying into the slower-growing Jack in the Box burger chain with more than three times as many locations as Qdoba.

Top of the Heap

Finally we have The Habit (HABT). Quality isn't a problem for the small but growing burger joint. The same Consumer Reports survey last year that found Chipotle at the top of heap for taste in the burrito category finds Habit as the leader in the burger category. The Habit Grill even beat out cult faves In-N-Out and Five Guys. It went public at $18 in November, trading as high as $44.20 a few weeks later before surrendering nearly a third of its value. With just 99 locations as of the end of 2014, it's still too early to tell if it will break through the glut of gourmet burger chains. Unlike Chipotle, it still has to vanquish the competition.

So, yes, Chipotle may have let down its investors on Tuesday, but good luck finding a better play on the fast-casual dining trend that should continue to get stronger in this improving economy.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.