Chipotle Mexican Grill shares fell by -5.2% during the day's morning session, and are now trading at a price of $59.51. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Trades Below Its Fair Value but Has an Elevated P/B Ratio:
Chipotle Mexican Grill, Inc., together with its subsidiaries, owns and operates Chipotle Mexican Grill restaurants. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.06 and an average price to book (P/B) ratio of 3.18. In contrast, Chipotle Mexican Grill has a trailing 12 month P/E ratio of 64.0 and a P/B ratio of 24.31.
Chipotle Mexican Grill's PEG ratio is 2.51, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Strong Revenue Growth and a Decent Current Ratio:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $4,865 | $5,586 | $5,985 | $7,547 | $8,635 | $9,872 |
| Operating Margins | 5% | 8% | 5% | 11% | 13% | 16% |
| Net Margins | 4% | 6% | 6% | 9% | 10% | 12% |
| Net Income (M) | $177 | $350 | $356 | $653 | $899 | $1,229 |
| Net Interest Expense (M) | $10 | $14 | $4 | $8 | $21 | $63 |
| Depreciation & Amort. (M) | $202 | $213 | $239 | $255 | $287 | $319 |
| Diluted Shares (M) | 28 | 28 | 28 | 29 | 28 | 28 |
| Earnings Per Share | $6.31 | $12.38 | $12.52 | $22.9 | $32.04 | $44.34 |
| EPS Growth | n/a | 96.2% | 1.13% | 82.91% | 39.91% | 38.39% |
| Avg. Price | $413.58 | $722.89 | $1060.86 | $1615.89 | $1445.2 | $59.51 |
| P/E Ratio | 65.13 | 57.28 | 83.27 | 69.62 | 44.77 | 1.33 |
| Free Cash Flow (M) | $334 | $388 | $290 | $840 | $844 | $1,223 |
| CAPEX (M) | $287 | $334 | $373 | $442 | $479 | $561 |
| Current Ratio | 1.81 | 1.61 | 1.73 | 1.58 | 1.28 | 1.57 |
Chipotle Mexican Grill benefits from rapidly growing revenues and increasing reinvestment in the business, strong operating margins with a positive growth rate, and exceptional EPS growth. The company's financial statements show generally positive cash flows and a decent current ratio of 1.57.
