Chipotle 's (NYSE: CMG) (NYSE: CMG-B)
third-quarter financial results looked pretty tasty. But the
stock's drop last week suggests that they still weren't spicy
enough for some investors.
The burrito chain reported that net income surged an
impressive 76.9%, to $34.5 million, or $1.08 per share.
Revenue increased 13.8% to $387.6 million, and same-store
sales increased 2.7%. Even those relatively modest gains are
no small feat in the current economy. In more happy news,
restaurant-level operating margin increased 410 basis points,
to 25.5%. By all appearances, the company is really
rockin'.
Chipotle even beat analysts' expectations, although many
Foolish investors would take such tidings with a grain of
salt (or a sprinkling of cilantro).
I think Chipotle's
a fantastic company. Its "Food With Integrity" mission
recalls the type of passion that
Whole Foods Market (Nasdaq: WFMI) displays
for organic and natural fare. The burrito chain helped to
sponsor a documentary on our food supply,
Food Inc., last summer, and I've recently noticed
vegan dishes at some Chipotle locations.Â
In my opinion, the restaurant's advocacy
of sustainably raised ingredients is a visionary
stand that will only grow more important to consumers over
time. At the very least, that type of passion definitely
differentiates Chipotle from cheaper fast-food rivals such as
former parent
McDonald's (NYSE: MCD),
Yum! Brands (NYSE: YUM), or
Wendy's/Arby's (NYSE: WEN). Â
It's hard to tell why investors reacted so negatively to
Chipotle's savory earnings. While I think Chipotle is a
high-quality stock, I'll admit that its share price has
gotten a bit overstuffed. Last quarter it was trading for a
bloated 30 times earnings, and even with its recent pullback,
it still commands a P/E of 28 times. McDonald's has been
doing very well operationally, and shares fetch only 16 times
earnings. And unlike Chipotle, Mickey D's pays its
shareholders a juicy dividend as well.
I don't think investors should throw Chipotle shares away;
it strikes me as a good long-term pick for a growth-geared
portfolio. In the near term, though, I think it's too
expensive to gobble up any shares now, and current
shareholders may endure a short-term roller-coaster ride,
given its high price. I may love the company, but I'm not
thrilled about its price tag.
Load your plate with some spicy related
Foolishness:
too hot to handle.
It was
cultivating a homegrown advantage, though.
In April,
some investors choked on Chipotle.
This article was originally published as
Chipotle: Hot or Not?on
Fool.com
Copyright © 2009 The Motley Fool, LLC. All rights
reserved.
|