Chipotle Mexican Grill, Inc. (CMG): A Tasty Investment in a Bland Industry

Valuations

Chipotle Mexican Grill, Inc. (NYSE:CMG) forward price-to-earnings ratio is 30.2, in comparison to McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM) which have ratios of 16.1 and 18.9 respectively. The dividend yields for McDonalds and Yum! are 3.10% and 1.90% respectively, while Chipotle does not pay a dividend and is not expected to pay one in the near future. The reason for this is that Chipotle is still in a growth phase while McDonald’s and Yum! have matured. Chiptole believes that the effective way to create shareholder value is by first investing into its business rather than by paying dividends.

Conclusion

Chipotle Mexican Grill, Inc. (NYSE:CMG)’s earnings and revenue have shown a significant growth over the years. The decrease of the company’s comparable restaurant sales is a point to fear, but strong earnings can be generated from additional ShopHouse locations. The management plan to raise its menu prices may have an impact on its sales, but its strong reputation and growing restaurant chains will allow it to maintain long-term earnings growth.

Red Chip has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald’s. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald’s.

The article A Tasty Investment in a Bland Industry originally appeared on Fool.com.

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