Chipotle Stock Rises on Positive Earnings – Is It Buy, Sell or Hold?

Chipotle Mexican Grill (CMG) posted strong revenue growth despite skyrocketing inflation and a reduction in consumer discretionary spending. However, given its high valuation, would it be worth buying the stock right now? let’s find out.


Shutterstock.com – Stocknews

Chipotle Mexican Grill, Inc. ,CMG) owns and operates the Chipotle Mexican Grill restaurant. As of February 15, 2022, it owned and operated approximately 3,000 restaurants in the United States, Canada, the United Kingdom, France, Germany and the rest of Europe.

Despite current inflationary pressures and tight consumer discretionary spending, CMG remains resilient. The company has given tremendous growth in the second quarter. CMG’s strong brand reputation helped it tackle rising cost of living. Its comparable restaurant sales grew 10% year over year in the quarter.

While the stock has gained 21.2% over the past month, it has lost 9.4% year-on-year.

Here’s what could shape CMG’s performance in the near term:

latest developments

In June, CMG announced its partnership with U.S. Women’s National Team (USWNT) soccer players Rose LaValle and Sophia Smith to make it as an official menu item on the Chipotle app and Chipotle.com for a limited time starting July 1. to launch your go-to orders.

Also, that same month, CMG officially launched its loyalty program, Chipotle Rewards, in Canada. It is the latest advancement in CMG’s efforts to make the brand more accessible and strengthen its relationship with its Canadian community.

CMG implemented its US loyalty program in 2019, and in just three years, 28 million members enrolled, making it one of the fastest growing loyalty programs in the history of the restaurant industry.

strong profitability

CMG’s 9.28% trailing-12-month net income margin of 6.37% is 45.8% higher than the industry average. In addition, its 38% trailing-12-month gross profit margin is 37% higher than its industry average of 2.63%.

premium valuation

In terms of forward P/E, the stock is currently trading at 48.24x, which is 275.1% higher than the 12.86x industry average. Plus, its forward EV/sales of 5.36x is 362.3% higher than the 1.16x industry average. In addition, CMG’s 5.03x Forward Price/Sales is 0.97x higher by 419.3% than the industry average.

mixed growth prospects

CMG’s revenue is expected to grow by 11.1% in the current quarter, 1.1% in the current year and 13.6% next year. eps It is expected to grow at a CAGR of 26.1 per cent over the next five years. Also, analysts expect the company’s EPS to grow by 30.5% in the current quarter, 29.2% in the current year and 29.8% next year.

However, analysts expect the company’s revenue to decline by 20.9% in the current quarter, 6.9% in the next quarter and 6.6% in the current year.

upbeat financial

For the second quarter ended June 30, 2022, CMG’s net revenue came in at $2.21 billion, representing a 17% year-over-year increase. Its income from operations increased 30% from its year-ago value to $527.82 million, while its adjusted net income rose 22.8% from its year-ago value to $261.19 million. Its adjusted EPS increased 24.7% from the prior-year quarter to $9.30.

Its net cash used in investment activities increased 4.7% from the prior period to $249.20 million for the six months ended June 30, 2022. Its net cash used in financing activities increased 132.5% from its prior period to $614.40 million.

Power rating reflects uncertainty

CMG’s overall C rating equals a neutral one we own power rating Arrangement The POWR rating is calculated by considering 118 different factors, each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CMG has a D grade for value, which is fair considering the high valuations from the industry. It also has a C grade for stability. Its 1.27 stock beta is in line with its stability grade.

Out of 44 stocks in B-rated restaurant Industry, CMG is ranked 24th.

In addition to what I’ve said above, you can check out CMG ratings for growth, quality, speed, and sentiment. Here,

ground level

Despite the company’s ability to remain resilient during inflationary conditions, CMG’s high valuation is worrying. Therefore, we think investors should wait before taking a rally in its shares.

Chipotle Mexican Grill, Inc. How does (CMG) stack up against its peers?

While CMG has an overall C rating, one may wish to consider its industry counterpart, Good Times Restaurants Inc. ,gtim) and Arcos Dorados Holdings Inc. Cl A (arco), which has an overall A (strong buy) rating, and Nathan’s Famous, Inc. ,Natho), which has an overall B (Buy) rating.


CMG shares were trading at $1,586.39 per share, up $2.06 (+0.13%) on Friday morning. Year-over-year, the CMG is down -9.26%, while the benchmark S&P 500 index has gained -12.62% during the same period.


About the Author: Spandan Khandelwal

Spandan Image2

Spandan is a financial journalist and investment analyst focused on the stock market. Along with their ability to interpret financial data, they aim to help investors evaluate a company’s fundamentals before investing.

More…

Post Chipotle Stock Rises on Positive Earnings – Is It Buy, Sell or Hold? first appeared StockNews.com