Chipotle Mexican Grill(CMG) The Motley Fool·2025-02-12 23:41Core Insights - Chipotle Mexican Grill has seen a remarkable stock performance, with shares increasing by 6,470% since its IPO in January 2006, turning a 657,000 today [1] - The company has significant growth potential, having opened 304 new locations in 2024, bringing the total to 3,726, which is a 42% increase from five years ago [2] - Revenue has risen by 14.6% in 2024, with consensus estimates predicting a 13% annualized revenue growth over the next three years, driven by healthy transaction growth and higher average ticket sizes [3] Expansion Plans - Management plans to open 315 to 345 new stores in 2025, with a long-term goal of reaching 7,000 locations in North America, focusing on drive-through setups called Chipotlanes for better customer accessibility [4] - Chipotle has also begun exploring international markets, with 29 stores in Europe and three licensed locations in the Middle East opened last year, indicating potential for further expansion [5] Pricing Power - Chipotle has demonstrated strong pricing power, consistently raising menu prices to counter inflation, resulting in an impressive operating margin of 24.8% [6] - There may be additional untapped pricing power, as same-store sales growth has been robust, and the company offers perceived value compared to its peers, with a 30% discount on average [7] Valuation Concerns - Chipotle shares have increased by 234% over the past five years, but the current price-to-earnings (P/E) ratio of 52.1 suggests an expensive valuation [8] - Despite a compound annual growth rate of 35% in earnings per share from 2019 to 2024, the high P/E ratio indicates that the market expects continued significant earnings growth, which may not be guaranteed [9] - While Chipotle is recognized as an outstanding company, current stock purchases may not yield long-term success and could underperform compared to the broader S&P 500 in the coming decade [10]