The price of Chipotle stock (NYSE:CMG) may provide contradictory signals to investors. While the high price is a sign of success, it has also prompted tiny investors to keep an eye on stock splits in the hopes that the shares may become more inexpensive.
Nonetheless, a nominal stock price has much less significance for a company than growth, profitability, and other criteria. Investors should pay attention to three variables that have historically driven Chipotle stock (NYSE:CMG) upward and will do so in the years to come.
1. Its pioneering position in healthful fast food
Chipotle has always distinguished out among fast food restaurants for its health-conscious food procurement techniques. It does not use artificial colors, flavors, or preservatives in its meals. It also prohibits the use of can openers and freezers, and it has pledged to ethically farm beef with no added hormones.
2. Chipotle’s potential for growth
Furthermore, with over 3,000 stores, Chipotle stock (NYSE:CMG) growth potential has gotten a lot of attention. It is present in 48 states and Washington, D.C. Because over 99% of its outlets are in the United States, it has raised concerns about its future growth.
Nonetheless, in a recent earnings conference, CEO Brian Niccol said that the firm might run 7,000 sites in North America. Chipotle has shown success in “small-town” sites, expanding its potential market. The firm aims to establish between 235 and 250 restaurants in 2022 (including 10-15 relocations), indicating that it is rapidly expanding.
3. Consistent sales and profit growth
But, regardless of its expansion intentions, few can deny Chipotle’s success in the face of adversity. During the pandemic, its computerized ordering method grew popular and currently accounts for 39% of all food and beverage sales. Even when restaurants reopened, Chipotle’s pricing strength has aided the firm in combating inflation.
Its $4.2 billion in sales for the first six months of 2022 increased 16% over the same period in 2021. Chipotle was able to keep spending growth below sales growth, enabling net income to climb 33% to $418 million over this time.
Analysts estimate that it will sustain its 16% sales growth rate for the rest of the year. This might explain why its 12-month stock performance roughly mirrors that of the S&P 500.
It has, nevertheless, had a long track record of performance, which may explain its expensive price-to-earnings (P/E) ratio of 62. This is much more than comparable restaurant companies like McDonald’s, which trades at 31 times earnings. Still, investors should remember that Chipotle has seldom traded for less than 50 times earnings over the previous five years and will do so in the years to come.
Consider Chipotle Stock.
To be sure, many investors would want Chipotle stock (NYSE:CMG) to split. Even if it never splits, Chipotle’s healthy fast food model is a popular favorite. Chipotle stock (NYSE:CMG) may continue to rise despite its high P/E ratio as long as it continues to build locations and capitalize on its pricing power.
Featured Image – Megapixl © Bigapplestock
Author Okoro Chinedu 
