Now Is Not The Time To Buy Chipotle Mexican Grill Stock

Chipotle Mexican Grill (NYSE: CMG) is a strong business with healthy margins and a rock-solid balance sheet, but its stock still looks pricey. Despite a 30% drop this year, the “cheap Chipotle” narrative feels overstated. Growth has slowed, valuation remains lofty, and consumer softness could make the coming quarters choppy. The S&P 500 is up 13% in 2025, while Chipotle lags, even struggling Starbucks stock (NASDAQ: SBUX)(down 11%). Sure, the brand is expanding globally, exploring Asia, and rolling out new menu items—but that doesn’t make the stock cheap. CMG still trades at roughly 37 times earnings and 4.7 times sales, a premium for a company whose growth and traffic trends are moderating.

For investors who seek lower volatility than individual stocks, the Trefis High Quality Portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately check, Micron Stock A Better Bet Than Analog Devices?

Photo by KreativeHub on Pixabay

The Growth Story Has Cooled

Chipotle is still growing, but the momentum has eased. Over the past three years, revenue rose about 12.5% annually, but in the last twelve months that growth slowed to 8.6%, and the most recent quarter came in at just 3% year-over-year.

That’s decent performance—but not the kind that warrants a luxury multiple. As inflation squeezes consumers and menu prices creep higher, Chipotle’s same-store sales strength may continue to fade.

Solid Profitability and Strong Balance Sheet

To be fair, the fundamentals are healthy. Chipotle’s operating margin of about 17% and net margin near 13% point to a well-run operation with tight cost control. The company generates roughly $2 billion in operating cash flow annually and carries minimal debt—just $4.8 billion versus a $55 billion market cap. With over $1.5 billion in cash, Chipotle’s financial stability is excellent.

That strength gives management flexibility to invest through downturns or fund expansion abroad. In short, Chipotle is financially sturdy—it’s just not firing on all cylinders operationally.

The Risk: Paying Up for “Moderate”

Here’s the key issue: what you pay versus what you get. Chipotle’s valuation reflects perfection, but its current business performance is merely moderate. Growth is slowing, inflation is sticky, and expansion takes time to pay off. Even with a strong balance sheet, that combination rarely justifies a high multiple. If earnings on October 29 show further margin compression or softer traffic, investors could easily see another leg down.

Long-Term Resilience, But Short-Term Risk

Chipotle’s history shows it can rebound fast. In the pandemic crash, CMG dropped more than 50%—then fully recovered in just a few months. That kind of brand loyalty and recovery speed is rare. But it also highlights the stock’s volatility. When sentiment turns, it turns sharply.

So, while Chipotle tends to come back stronger after major shocks, the timing can be painful for investors who buy too soon.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read CMG Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.