Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Chipotle Mexican Grill (CMG) is one of those companies that vexes investors. Operationally, the company has done an excellent job and within its space is the high growth name. But at what price? The stock has had a steady 2012 and among the best technicals. Last quarter it reported – had a few warts in the data – but no one cared; they just kept buying. Now, three months later, we’re looking at a company trading at some 48x forward earnings. While growth is 25-30%, for those who use GARP (“Growth at a Reasonable Rate”) this is a 2x multiple to growth – pricey. But it is difficult to argue with the price action.
Last evening, Chipotle does what it has always done – enough to impress investors. Revenue +25.8%, SSS +12.7%, EPS +34.9%. They also continue to have enough pricing power to raise prices on their menu items. Full report here.
Via Reuters:
- First-quarter net income rose 35 percent to $62.7 million, or $1.97 per share, at Chipotle. Analysts, on average, were looking for a profit of $1.93 per share, according to Thomson Reuters I/B/E/S.
- First-quarter revenue rose a better-than-expected 26 percent to $640.6 million.
- Sales at restaurants open at least 13 months were up 12.7 percent, blowing past the 10.5 percent rise expected by analysts polled by Thomson Reuters.
- Chipotle repeated its forecasts for 2012 growth in sales at established restaurants in the mid-single digit percentage range and a similar rise in food inflation.
- The Denver-based company raised menu prices in the Pacific region in March, but does not plan any more price increases this year to offset higher costs for ingredients such as beef and cheese.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
