Over the last six months, Chipotle’s shares have sunk to $29.20, producing a disappointing 13.4% loss - a stark contrast to the S&P 500’s 8% gain. This might have investors contemplating their next move.
Following the pullback, is now an opportune time to buy CMG? Find out in our full research report, it’s free.
Why Do Investors Watch CMG Stock?
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
Three Positive Attributes:
1. New Restaurants Opening at Breakneck Speed
A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.
Chipotle operated 4,090 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 8.5% annual growth, much faster than the broader restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
With $12.14 billion in revenue over the past 12 months, Chipotle is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Chipotle’s five-year average ROIC was 19.4%, placing it among the best restaurant companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
There are definitely things to like about Chipotle. With the recent decline, the stock trades at 24.6× forward P/E (or $29.20 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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