Chipotle Mexican Grill, Inc. (CMG) vs. Taco Bell: Who Wins?

Viewing customer traffic from this side-by-side vantage point was eye-opening. If anyone’s stealing market share in this Mexican match-up, it appears to be Chipotle Mexican Grill, Inc. (NYSE:CMG).

Keeping an eye on growth
It’s worthwhile to go back to brave the hardcore weekend throngs of mall crawlers to collect more data. Still, for whatever reason, this particular Chipotle Mexican Grill, Inc. (NYSE:CMG) and its burritos were going like gangbusters. In addition, the burrito-making team was incredibly swift and efficient. They have to be, for lines like that.

Anecdotal evidence is never enough for a full investment thesis. However, it can at least bolster one’s visual sense of a business’s performance. And some of the Chipotle-centric behavior I observed certainly segues with recent quarterly results.

Chipotle’s recent results have reestablished it in investors’ good graces after it got slammed by Einhorn’s Taco Bell thesis. Just last quarter, Chipotle’s same-restaurant sales increased 5.5%, and total revenue increased 18.2%. Net income jumped 7.6%.

According to Yum! Brands, Inc. (NYSE:YUM)’s most-recent quarterly results, also released in July, Taco Bell did report same-store sales growth in the U.S., but it’s not incredibly impressive at 2%.

Chipotle’s former parent McDonald’s Corporation (NYSE:MCD)’s has been in a longtime trough. Its most recent quarterly results paled in comparison to Chipotle, too, and it’s well established that it needs a turnaround. Obviously, we do know that McDonald’s is a profitable company and a dividend payer, but if growth gets choked, that’s a problem for the investment. Its same-store sales rose an incredibly anemic 0.7%.

Hungry for long-term winners
For many self-identified value investors, Chipotle’s valuation likely looks appalling at 32 times forward earnings. Yum! Brands and McDonald’s certainly look cheaper in the fast food realm, at 19 and 16 times forward earnings, respectively.

However, Chipotle appears to be as popular as ever, and recent numbers back that up. Other fast-food rivals are struggling for growth, and what may look like relative bargains may indeed prove to have been expensive at these levels over the long run. Chipotle’s a keeper, and even a buy for long-term investors; buying on the Einhorn-sparked dip ended up being a great way to get a real bargain. Quality companies pay off over the long run.

The article Chipotle, Taco Bell Head-to-Head: No Contest originally appeared on Fool.com and is written by Alyce Lomax.

Alyce Lomax owns shares of Chipotle Mexican Grill (NYSE:CMG). The Motley Fool recommends Chipotle Mexican Grill, McDonald’s, and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald’s, and Panera Bread.

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