If you have ever eaten at a Chipotle (CMG), then you probably noticed how fresh their ingredients were and how delicious their food is.
It was founded in 1993 and they have built their business around providing nothing but the freshest local produce. This makes them unique, as other restaurants bring in all of their food from who knows where.
This provides Chipotle with something referred to as a “moat,” which means it’s harder for another company to come in and compete for the same customers.
The company went public in January of 2006 at a share price of $45 and has been on an upward trend ever since.
It was able to overcome more than one major setback, including a big one when the stock dropped by more than 21% in 2016 due to cases of E. coli and norovirus popping up in their restaurants.
The fear of this event caused investors to sell their shares in a rush, which is why it dropped so far in a short period of time. However, since Chipotle is an amazing company with a strong balance sheet, it was able to recover to reach new highs.
Aside from all this, the company still has to have strong numbers and a good balance sheet if you are going to consider adding them to your long-term portfolio. So let’s take a look.
CMG by the numbers
CMG’s market cap is just over $32 billion and continually growing, which means investors value the stock and are willing to keep investing.
Earnings per share (EPS) currently sits around $9. This is a strong number and helps show how sturdy their current balance sheet is. Over the last 10 years average a return on equity (ROE) of just under 17% and return on invested capital (ROIC) is averaging around the same.
CMG has virtually zero debt, which is part of the reason why the stock has been climbing during the pandemic. This is no easy feat, seeing as so many other restaurants have been hit extremely hard and are struggling to stay open, with many having to file for bankruptcy.
Sales growth over the past decade is between 11% and 12% and projected growth currently sits around 20%.
If this projection is true, then Chipotle stock will be worth more than $3,000 in the next ten years, with a future EPS of more than $70.
CMG has a free cash flow per share (FCF) of more than $14, which means it is sitting on large cash reserves. This is promising, especially during the current unprecedented times.
Chipotle has beat earnings predictions over the past four quarters, including their most recent quarter just reported this month.
It’s great to see a company exceeding expectations during trying times, and I believe this will continue regardless of how long the pandemic lasts. Especially if the past is any indication of the future.
Although I don’t think they are currently at a discounted price, they are on my watch list and once they hit my price I won’t hesitate to pull the trigger.
Whether you decide to get in right now or place CMG on your watchlist and wait for a lower price, I believe either choice will pay off in the long run.
