CMG Dropped 18% In A Month. Have You Fully Evaluated The Risk?
Chipotle Mexican Grill (CMG) stock is down 17.7% in 21 trading days. Already own the stock or planning to buy? You might want to re-consider based on the valuation as the stock still looks expensive. Consider the following data:
- Size: A $60 Bil company with $11 Bil in revenue currently trading at $44.04.
- Fundamentals: Last 12 month revenue growth of 12.6% and operating margin of 17.6%.
- Liquidity: Has Debt to Equity ratio of 0.1 and Cash to Assets ratio of 0.2
- Valuation: Currently trading at P/E multiple of 38.2 and P/EBIT multiple of 29.5
- Has one instance since 2010 where it dipped >30% in < 30 days and subsequently returned 141% within a year. See CMG Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for CMG, see Buy or Sell CMG Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and CMG drops another 20-30% to $30.83 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Chipotle Mexican Grill (CMG) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: CMG provides fast-casual Mexican cuisine with approximately 3,000 restaurants across the United States, Canada, the United Kingdom, France, Germany, and Europe since 1993.
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2022 Inflation Shock
- CMG stock fell 38.1% from a high of $38.88 on 23 September 2021 to $24.08 on 14 June 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 26 April 2023
- Since then, the stock increased to a high of $68.55 on 19 June 2024 , and currently trades at $44.04
| CMG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -38.1% | -25.4% |
| Time to Full Recovery | 316 days | 464 days |
2020 Covid Pandemic
- CMG stock fell 50.2% from a high of $18.68 on 19 February 2020 to $9.30 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 11 May 2020
| CMG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -50.2% | -33.9% |
| Time to Full Recovery | 54 days | 148 days |
2018 Correction
- CMG stock fell 49.3% from a high of $9.92 on 16 May 2017 to $5.03 on 13 February 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 15 August 2018
| CMG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -49.3% | -19.8% |
| Time to Full Recovery | 183 days | 120 days |
2008 Global Financial Crisis
- CMG stock fell 74.6% from a high of $3.05 on 26 December 2007 to $0.77 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 15 June 2010
| CMG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -74.6% | -56.8% |
| Time to Full Recovery | 572 days | 1480 days |
Worried that CMG could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.