Since May 2024, Chipotle has been in a holding pattern, posting a small loss of 1.1% while floating around $62.40. The stock also fell short of the S&P 500’s 12.7% gain during that period.
Does this present a buying opportunity for CMG? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Is Chipotle a Good Business?
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE:CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
1. New Restaurants Opening at Breakneck Speed
The number of dining locations a restaurant chain operates is a critical driver of how quickly company-level sales can grow.
Chipotle operated 3,615 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years and averaged 7.7% annual growth, much faster than the broader restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at restaurants open for at least a year.
Chipotle has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 7.7%.
3. Economies of Scale Give It Negotiating Leverage with Suppliers
Chipotle is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost.
Final Judgment
These are just a few reasons why Chipotle ranks highly on our list. With its shares trailing the market in recent months, the stock trades at 50.2x forward price-to-earnings (or $62.40 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Chipotle
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