Chipotle Mexican Grill, Inc (NYSE: CMG), together with its subsidiaries, owns and operates Chipotle Mexican Grill restaurants. It offers burritos, burrito bowls, quesadillas, tacos, and salads. The company was founded in 1993 and is headquartered in Newport Beach, California.
Company Overview
- Market Cap: 59.01 Billion
- PE Ratio: 57.83
- EPS: 36.99
- Average Analyst Rating: 1.9 Buy
Chipotle’s $2.4 billion revenue in the first three months of 2023 was 71% higher than the company’s sales in first-quarter 2020. And in recent quarters, when many businesses struggled with slowing demand as people tried to stretch their budgets, Chipotle keeps posting double-digit revenue gains like clockwork.
Key to this impressive growth is its ever-expanding store footprint. Chipotle opened 236 new stores in 2022, and another 41 in the first quarter. The business now has 3,224 locations. But the leadership team, led by CEO Brian Niccol, believes that the chain can one day have more than 7,000 stores in North America.
Moreover, Chipotle has done a good job of boosting same-store sales, which measures the revenue growth of restaurants open at least 13 months. Same-store sales jumped 11% during Q1, and management believes this metric will rise mid- to high-single digits for the full year of 2023.
Inflation has been pushing up costs for companies of all shapes and sizes. In Chipotle’s case, it had to pay higher prices for things like avocados, dairy and paper products, and beef during 2022. While these pressures have abated somewhat, it’s encouraging to know that the business has been able to raise its menu prices on multiple occasions to combat the effects of inflation. Chipotle’s operating margin was 15.5% during Q1, up from 9.4% in the year-ago period. This helped drive net income growth of 85%, much faster than the revenue gain.
Besides operational improvements and pricing power, Chipotle’s margins have been boosted by the aggressive opening of Chipotlanes, the popular drive-through option designed for pick-ups of digital orders. Locations fitted with a Chipotlane produce better new store sales, margins, and returns. Therefore, this is the best restaurant growth stock for now.