About Chipotle Stock

“Oh, hi, can I get a bowl to go?…”

“White or brown rice?”

“Brown, please.”

“What kind of protein?”

“Chicken.”

*gets handed over to the next employee in line.

“What else do you want?”

“Um, can I just get sour cream, cheese and lettuce please?”

*gets handed over to the final employee managing the cash register.

“Will that be all today?”

“Can I please get a bag of chips, please?”

“Thanks!”

Yep, that’s basically how it goes.

I also once saw a sign that said something to the extent of “food inspection certification available upon request” and shamelessly asked to see it. They told me it was on paper near the bathrooms.

Chipotle is where it’s at.

They scoop rice into a bowl for me, ask me questions and tell me where I can see their food inspection certification.

Ok, so we’ve established that Chipotle is a super cool place to be, however is it cool enough to put your money into the company’s stock?

Chipotle’s financials stock

The elephant in the room is that the current share price (as of this writing on 5/11/2022) is around $1,321. Before even checking to see if their stock price appears to be under or overvalued, this is a pretty penny to pay for one share of stock.

Nonetheless, does Chipotle stock appear to be trading at fair value?

Nope.

The company’s current price-to-earnings ratio stands at slightly higher than 54 which is markedly higher than the “20 is fair valued, below is undervalued and above is overvalued” benchmark we reference at MacroHint.

This stock is obscenely? overvalued right now. This can likely be attributed to their massive growth both in customers, their delivery presence with partners such as DoorDash as well as simply planting stores in new markets around the globe.

This would also explain why the company does not currently offer shareholders a dividend; the company wants to retain all the cash it can in order to continue to fuel its growth.

Although it can be seen that the company’s stock is overvalued as a result of their fantastic growth, let’s get a better understanding of Chipotle and its financial situation.

Chipotle manages a balance sheet consisting of (as of the last report in 2021) around $6.6 billion in total assets and roughly $4.3 billion in total liabilities.

Due to the generally low margin nature of the casual dining and fast-food industry, this doesn’t really surprise us. Frankly, we would’ve assumed the company’s balance sheet would have been far more riddled with debt given its high rate of growth throughout the years. However, we were happily surprised that their total liabilities do not outweigh their total assets.

Shifting gears to the income statement, Chipotle’s revenue growth has been in line with its Pollo Asado chicken: spicy!

Chipotle’s revenue stock

Specifically, the company’s total revenue in 2017 was nearly $4.5 billion and has since grown each year all the way up to just over $7.5 billion in 2021. The fact that Chipotle’s revenue still increased during the pandemic is indicative of how strong this company has become. As we touched on earlier, delivery partnerships have likely proven to be a major boost for the company even when the global economy was shut down.

Chipotle’s cash flow stock

Onto the company’s cash flow statement, Chipotle’s net income has risen in a similar fashion to their total revenue. It should be noted that their net income did have a significant spike between 2020 and 2021, standing at $356 million and $653 million respectively.

This means the company has nearly double the amount of money they had before to reinvest in the company, open new locations, pay down some of its debt and maybe even offer investors a dividend. Honestly, we would prefer Chipotle not worry about paying out a dividend, at least in the near to intermediate future.

Regardless of whether I am a current or prospective investor in the company, I want this company to put every dime it can back into the business in order to continue growing for the long term. While most “blue chip” companies don’t have much more room to grow, Chipotle is an outlier. As a long-term investor, I would want the company’s executive team to continue to drive growth which will likely increase the value and share price of the stock.

Chipotle’s profitability and other financials stock

Chipotle can also squeeze out a substantial profit, as the company’s annual net profit margin sits dramatically higher than the industry average.

Furthermore, the company’s annual return(s) on equity, assets and investment are also substantially higher than the industry average.

Chipotle’s delivery partnerships stock

While the demand for ordering online and picking up in-store or having bowls and burritos delivered has increased, we don’t think this demand is to let up anytime soon. Obviously, this growth will likely wane a bit given the overall easing of pandemic restrictions, but we believe a vast number of consumers have become accustomed to having food magically appear at their door.

Not only does the company have partnerships with DoorDash, but they also have deals with fellow delivery domineer, Uber Eats.

Having deals with these massive delivery players is only going to help fuel Chipotle’s growth at a steady rate in the United States and other nations as well.

Should you buy Chipotle stock?  

Our biggest complaint is the current share price.

The company has simply done too well in terms of growing, expanding and providing for its customers through different channels (ie. delivery, in-person etc..).

Given the company’s solid financials, steady growth throughout the years, pandemic prosperity and currently inflated share price, we give Chipotle a “hold” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.