Although Cipotle (CMG) is down from $600 to $500, the stock is still sky-high because it has a P/E of 40. And now, higher beef prices are crimping profits. Profit growth was only 8% last quarter, and is expected to be 9% this quarter. That’s not good.
But what is good is same store sales, which is the most important factor in a retailer’s stock price. Same store sales surged 13% last quarter, and this helped boost overall sales growth to 24%. Both traffic and check size increased. 13% is a phenomenal number, and this should be able to keep the stock strong and timely — even through single-digit profit growth.
One Year Chart
CMG stock is down from $600 to $500 but still carries a 40 P/E. I think someday the P/E will come down to 20 or 25 and cream investors, that’s why I don’t own the stock currently.
Although profit growth is expected to be poor next quarter, but is scheduled to rebound later in the year. 27% growth is expected 2QtrsOut, followed by 34% and 33% the following quarters. But, these number may get reduced. NxtQtrs estimate just fell by almost 10% (higher beef costs).
Fair Value
Superior same store sales growth makes me put CMG’s Fair Value at 30 times earnings. It’s still got a long way to fall before I’d be interested.
Sharek’s Take
Chipotle has come down from $600 to $500 but still doesn’t look attractive until it gets below $400. Business is great, but profits are being hurt by high beef prices. A P/E of 40 with single-digit profit growth make this stock dangerous to own.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
