Does the Future of Chipotle Mexican Grill (NYSE:CMG) Look Bright?

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By Chris Hillman on December 2, 2014 Consumer Staples

Since the recession, the stocks of Chipotle Mexican Grill (NYSE:CMG) have seen quite an increase. The stocks of burrito chain have increased by 1000 percent since 2009. A lot of investors are worried that the stocks would have a pullback in the coming quarters, so let’s just examine and analyze them.

The stocks of Chipotle Mexican Grill (NYSE:CMG) are being traded at quite a high price, especially when compared with a P/E (price to earnings) ratio of 51. However, the price is justified if the future of the company can be warranted. The management of Chipotle Mexican Grill (NYSE:CMG), at the first initial public offering of the company, announced that it plans on opening up around 4000 restaurants in the region of United States. Till now, the company has opened up around 2000 restaurants. The sales in company’s restaurants are soaring, which indicates to the fact that the country has a much more demand for Chipotle food than what the management estimated.

Chipotle Mexican Grill (NYSE:CMG) should aim at 10,000 in order to beat the other mega food chains in the country. It is important to mention here that Subway has around 25,000 restaurants whereas McDonald’s has approximately 15,000 outlets in the U.S. The company will see a slower growth than that of Subway and McDonald’s, for it does not have the franchising benefit right now.

Many investors are unhappy with the guidance report that the company has posted for its upcoming year. However, what they are forgetting is the fact that Chipotle posted similar numbers for the current year, which proved quite low. The comps would be modest, for they do not enjoy the advantage of price increase.

With Standard & Poor’s 500’s P/E at 20, the food market is quite over-valued these days. It is important to mention here that the industry average stands at 15.5. Chipotle Mexican Grill (NYSE:CMG) can benefit from this over-valuation provided that it plays its cards right.

Market experts do not expect the company to post very high numbers this year. However, the stock is still expected to outperform the market.

Chipotle Mexican Grill (NYSE:CMG) is a company with an extraordinary growth rate. The best thing for the investors to do is waiting and seizing the opportunity when the company introduces it buyback program.

Chipotle recently posted its figures. During the third quarter, the company saw an increase of 31.1 percent in its sales. The same-store sales also saw an increase of 19.8 percent. Such figures exhibit nothing but the amazing capabilities that the company’s management has and the mind-blowing strategies that it employed in order to increase the sales.

Coming to the stock prices of Chipotle Mexican Grill (NYSE:CMG), the company, on the last trading day of December 1, 2014, started its stocks at a price of $664.66 and closed at a price of $660.88, after hitting the highest price of $670.20. The company has a total market capitalization of $20.54 billion with a P/E (price to earnings) ratio of 51.53.