Amazon.com, Inc. (AMZN), Rackspace Hosting, Inc. (RAX), American International Group Inc (AIG): Four High P/E Stocks That Will Wreck Your Portfolio

4. Chipotle Mexican Grill, Inc. (NYSE:CMG) Finally, here’s one for the ‘foodies.’ In the middle of 2012 after reaching a high of around $440 per share and a P/E ratio of 58, the stock price of Mexican restaurant fell off a cliff, declining 40% over the next seven months after its earnings disappointed Wall Street. Since bottoming out in October 2012, Chipotle Mexican Grill, Inc. (NYSE:CMG) gained roughly 28% and most were excited to see its increase in revenue and earnings of 20% and 29%, respectively. Chipotle Mexican Grill, Inc. (NYSE:CMG) gave a very cautious outlook for 2013, most notably that comparable store sales (those stores that had been open longer than 1 year) will increase from “flat to low single digits” for the year.

A high P/E stock in its very basic form is one that produces high growth, telling investors that 2013 and beyond investors should expect little to no growth is not a formula for success. Shareholders should expect the price to fall to a level that is on par with a slow growth firm and at this price level that isn’t it. The stock is going to decline and is one earnings miss away from making national headlines for declines.

What do all these stocks have in common? Declining growth with current P/E ratios through the roof compared to their competition in their industry. Investors love a couple of things which include EPS growth, solid management, and low competition. What I just showed is completely opposite of all of this, investor should run for the exit as soon as possible.

The article 4 High P/E Stocks That Will Wreck Your Portfolio originally appeared on Fool.com and is written by Casey Walters.

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