Buy or Sell Chipotle Mexican Grill Stock?
Chipotle Mexican Grill (CMG) stock has fallen 18% during the past day, and is currently trading at $32.53. We believe there are only a couple of things to fear in CMG stock given its overall Strong operating performance and financial condition. This is aligned with the stock’s High valuation because of which we think it is Fairly Priced.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | High |
| What you get: | |
| Growth | Moderate |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | Moderate |
| Operating Performance | Strong |
| Stock Opinion | Fairly Priced |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $43 Bil in market cap, Chipotle Mexican Grill is a fast-casual restaurant chain offering Mexican-inspired cuisine with approximately 3,000 locations across the United States, Canada, and Europe.
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[1] Valuation Looks High
| CMG | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 3.8 | 3.2 |
| Price-to-Earnings Ratio | 28.8 | 23.6 |
| Price-to-Free Cash Flow Ratio | 28.1 | 20.6 |
This table highlights how CMG is valued vs broader market. For more details see: CMG Valuation Ratios
[2] Growth Is Moderate
- Chipotle Mexican Grill has seen its top line grow at an average rate of 11.9% over the last 3 years
- Its revenues have grown 7.3% from $11 Bil to $12 Bil in the last 12 months
- Also, its quarterly revenues grew 7.5% to $3.0 Bil in the most recent quarter from $2.8 Bil a year ago.
| CMG | S&P 500 | |
|---|---|---|
| 3-Year Average | 11.9% | 5.3% |
| Latest Twelve Months* | 7.3% | 5.4% |
| Most Recent Quarter (YoY)* | 7.5% | 6.4% |
This table highlights how CMG is growing vs broader market. For more details see: CMG Revenue Comparison
[3] Profitability Appears Moderate
- CMG last 12 month operating income was $2.0 Bil representing operating margin of 16.9%
- With cash flow margin of 18.8%, it generated nearly $2.2 Bil in operating cash flow over this period
- For the same period, CMG generated nearly $1.5 Bil in net income, suggesting net margin of about 13.0%
| CMG | S&P 500 | |
|---|---|---|
| Current Operating Margin | 16.9% | 18.7% |
| Current OCF Margin | 18.8% | 20.4% |
| Current Net Income Margin | 13.0% | 12.8% |
This table highlights how CMG profitability vs broader market. For more details see: CMG Operating Income Comparison
[4] Financial Stability Looks Very Strong
- CMG Debt was $5.0 Bil at the end of the most recent quarter, while its current Market Cap is $43 Bil. This implies Debt-to-Equity Ratio of 11.2%
- CMG Cash (including cash equivalents) makes up $1.4 Bil of $9.3 Bil in total Assets. This yields a Cash-to-Assets Ratio of 15.3%
| CMG | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 11.2% | 21.2% |
| Current Cash-to-Assets Ratio | 15.3% | 6.9% |
[5] Downturn Resilience Is Moderate
CMG saw an impact slightly better 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.
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 $32.53
| 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 |
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 |
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.
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 – S&P 500, Russell, and S&P midcap. 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.