Chipotle Mexican Grill (CMG)
By
J. Royden Ward, Analyst and Editor of
Cabot Benjamin Graham Value LetterFrom Cabot Wealth Advisory, 8/24/09
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Chipotle Mexican Grill (CMG) is a restaurant chain that serves healthy food and has a healthy balance sheet. I featured Chipotle in the latest issue of my Cabot Benjamin Graham Value Letter.
Chipotle is defined as a smoked and usually dried jalapeno chili used in Mexican or Mexican-inspired cuisine. Chipotle chilies are used to make various salsas. The company, Chipotle Mexican Grill, develops and operates 886 restaurants in 33 states.
CMG has become highly successful by offering fast service and high-quality Mexican food in a casual atmosphere. All dishes are prepared using fresh ingredients. The company emphasizes the use of raw ingredients that are raised without the use of animal byproducts, antibiotics or hormones, as well as produce that is grown using sustainable farming methods.
Same store sales increased 1.9% during the six months ended June 30, despite the current slump at other restaurants. Total sales increased 15% as a result of menu price increases and the opening of 50 new restaurants. Earnings per share jumped 49%, aided by the price increases and some cost cutting.
Chipotle will expand aggressively during the next several years, which will drive 20% or better sales and earnings growth during the next three to five years. The company plans to open about 125 new restaurants in 2009 after opening 136 in 2008. Chipotle opened its first restaurant in Canada in 2008 and will add many new locations there in the future.
Chipotle has a very strong balance sheet with lots of cash and no debt. The company pays no dividend. CMG shares sell at a reasonable 24.2 times next 12-month EPS. I highly recommend buying CMG at the current price.
Editor's Note: You can read more about Chipotle and get continuing coverage of the stock in Cabot Benjamin Graham Value Letter. There you'll not only find buy and sell advice for CMG, you'll get dozens of other excellent value stock recommendations from J. Royden Ward each and every month. Roy applies the strategy of the father of value investing, Benjamin Graham, to find the market's best undervalued stocks. This year he's already uncovered several stocks that were sold for double-digit profits! Don't miss out on his next recommendations...click here now to get started today!
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