Chipotle: A Bargain After Stock SplitChipotle: A Bargain After Stock Split Key Points: * Chipotle Mexican Grill (CMG) has a strong track record of growth and profitability. * The recent 50-for-1 stock split has made CMG shares more affordable. * Despite recent price declines, Chipotle stock remains undervalued based on its fundamentals. Strong Fundamentals: Despite trading at a high multiple of 65 times earnings, Chipotle’s success is reflected in its exceptional financial results. In the first quarter of 2023, the company reported: * Earnings per share of $13.37, exceeding Wall Street expectations * Revenue of $2.70 billion, also beating consensus forecasts * Same-store sales growth of 7%, outperforming analysts’ estimates Continuous Growth: Chipotle is committed to expansion, opening 47 new locations in the first quarter and targeting 285-315 new store openings in 2023. This growth strategy aligns with the company’s goal of doubling its restaurant count to 7,000. Long-Term Winner: Since its 2006 IPO, CMG stock has risen over 7,200%. Over the past 12 months, it has increased by 45%. This growth is attributed to strong financial performance and consistent restaurant expansion. Buy Opportunity: The recent stock split has made Chipotle shares more accessible to retail investors. Despite a 7% dip following the split, the stock remains a bargain based on its fundamentals. Analysts recommend buying CMG for its long-term growth potential.
The restaurant chain remains one of the best growth stocks investors can own
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Investors looking for a long-term compounder should consider: Chipotle Mexican Grill (NYSE:CMG). After the company’s recent 50-for-1 stock split, Chipotle’s stock appears to be a bargain.
The restaurant chain, which specializes in Mexican cuisine and is known for its fresh ingredients, recently conducted the first stock split in its history, making its shares more affordable than they have been in more than a decade.
Before the split, a single share of CMG cost more than $3,200. Now, investors can buy shares for $61 each. This presents an opportunity to take a position in a leading growth stock that has an impressive track record of delivering profits to shareholders.
Chipotle Stock Split
Chipotle’s 50-for-1 stock split, effected on June 26, was one of the largest in the history of the New York Stock Exchange. While the split did not change the fundamentals or underlying value of Chipotle stock, it did make the stock more accessible to retail investors.
Since the stock split, Chipotle shares have fallen 7% as some investors used the split as an opportunity to sell shares and lock in gains. But the recent dip is yet another reason to buy the stock.
Chipotle stock has been a long-term winner for shareholders. Since its 2006 IPO, CMG stock has risen more than 7,200%, pushing its price above $3,000 before the split.
Over the past 12 months, the stock has increased by 45%. The steady growth is the result of strong financial results and consistent expansion of the company’s restaurants over the years.
While some analysts complain that Chipotle shares trade at a high multiple of 65 times earnings, this reflects the company’s success.
Strong profits
Chipotle Mexican Grill’s exceptional first-quarter financial results and optimistic outlook were indicative of what we could expect from the company.
Chipotle, based in Newport Beach, California, reported first-quarter earnings of $13.37 per share, compared with the $11.68 forecast on Wall Street.
Revenue in the period was $2.70 billion, compared with analysts’ consensus forecast of $2.68 billion. Sales rose 14% from a year earlier.
Chipotle said same-store sales rose 7%, beating estimates of 5.2% growth. The company has managed to report more customer traffic despite higher menu prices.
The company has also worked to produce its groceries faster, improving an industry benchmark known as “throughput.” Management said Chipotle’s throughput reached its highest level in four years in the first quarter.
Continuous growth
The restaurant chain also continues to grow, opening 47 new locations in the quarter, moving closer to its goal of doubling its total number of restaurants to 7,000.
Chipotle expects comparable-store sales growth to be in the mid- to high-single digits and reiterated its forecast of 285 to 315 new store openings this year.
There has been a recent backlash against Chipotle online over claims that the company has reduced its food portions, but they don’t appear to have had a significant impact. The portion debate has no bearing on Chipotle’s long-term growth potential.
Buy Chipotle Stock
Chipotle has been one of the best stocks investors can own for nearly 20 years. In addition to being one of the best restaurant stocks, Chipotle has proven to be one of the very best growth stocks investors can have in their portfolio.
Chipotle, well-run with a continued focus on growth, continues to beat Wall Street expectations. The recent 50-for-1 stock split has made the stock more affordable and within reach of most investors.
People should take advantage of the opportunity and buy Chipotle stock.
On the date of publication, Joel Baglole had no positions (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are the opinions of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He was a staff reporter for The Wall Street Journal for five years and has also written for The Washington Post and Toronto Star newspapers, and for financial websites such as The Motley Fool and Investopedia.
