| Stock (Symbol) | Stock Price | |
Chipotle (CMG) |
$285 |
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| Data is as of | Expected to Report | Sector |
April 16, 2011 |
Apr 20 |
Retail & Restaurant |
| Sharek’s Take | ||
 Chipotle’s high — the stock’s been on a tear and now the question is: When will it end? CMG’s 42 P/E is high for a restaurant which is expected to grow 20% long=term. But although CMG is high, don’t bet against this stock. bSame store sales are a leading indicator for restaurant stocks. Same store sales of 13% last quarter, and 11% the quarter before, mean this stock should stay hot. There are now more than 1000 Chipotles operating and the company should open 135-145 this year. The next growth opportunities are expansion into Europe (its already in London) and an Asian chain, ShopHouse Southeast Asian Kitchen, on the horizon. Although CMG has a high P/E, when looking back historically over the past century, growth stocks often prove to be better buys than their P/E suggests. |
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| One-Year Chart | ||
 Wow, what a run. Five quarters ago this stock was $85 and now its $285 — the P/E was 21 (highlighted in green on the one-year chart) and now its 42.Estimates for the next two quarters show 21% and 17% profit growth ahead. Considering CMG has been whipping estimates on the back of solid sale store sales increases, you can’t say the end of the run is here. |
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| Earnings Table | ||
 Chipotle’s profits rose 48%. Sales growth has grown from 16% four quarters ago to 20%, 23% and 25% last quarter. Momentum is strong as CMG has beat the street by at least 20 cents the last two quarters. Again, I can’t assume the end is here. Annual Profit Estimates went higher, but not as much as they a quarter ago.For those who are thinking positively, the company is expected to earn more than $10 two years from now. A P/E of 25 to 30 means the stock would be around $250 to $300 is this number doesn’t increase. It likely will. Quarterly estimates did not increase as they had been doing in previous quarters. So momentum should slow a bit. I still think CMG will beat next quarter, but if it doesn’t beat by 20 cents the stock could open up down. |
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| Fair Value | ||
 Last quarter with the stock at $230 I thought it would go to $260. Now with the stock at $285, I think the stock’s worth $270. There’s still a little appreciation potential a year-out, and I expect estimates to increase, so maybe CMG has 20-25% upside in the coming year. |
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| Ten-Year Chart | ||
 CMG’ has carried a high P/E before. In January 2008 the stock was around $150 and sold for 55 times 2008 estimates of $2.72. But when CMG only made $2.36 that year the stock took fell. The sell clue I’m looking for is annual estimates declining. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
13 of 21 |
CMG is the 13th best stock in the 21 stock Growth Portfolio. The stock is not on sale, and the 42 P/E limits upside. Still, this stock has growth opportunity because its expanding into Europe and the company continues to beat the street. CMG is not part of the Aggresive Growth Portfolio. The stock has already been on a remarkable run. |
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Aggressive Growth Portfolio
N/A |
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