Continuation from yesterday……
| Key Statistics | 2006 | 2014 |
| Price Per Share | $42 | $660 |
| Market Cap | $1.3 Billion | $20.4 Billion |
| Earnings Per Share | $1.29 | $10.66 |
| P/E Ratio | 31 | 62 |
| Price/Sales Ratio | 1.58 | 5.66 |
| Price/Book Ratio | 2.74 | 11.70 |
| Revenue | $823 Million | $ 3.63 Billion |
| Net Income | $41.4 Million | $356 Million |
| Annual Earnings Growth | 31% (revenue) | 20% |
| Total Cash | $154 Million | $804 Million |
| Total Debt | $ 0 Million | $0 Million |
| Book Value Per Share | $15.3 | $56.51 |
| Shares Outstanding | 31 Million | 31 Million |
| Total Assets | $604 Million | $2 Billion |
| Shareholder Equity | $474 Million | $1.54 Billion |
As we look at the data above, one thing jumps out at us immediately. Just how overvalued the stock is. Not only in 2006, but even more so today. With a P/E of 62, a P/S ratio of 5.66 and a P/B ratio of 11.70, Chipotle’s has one of the highest valuation multiples in the restaurant industry and on par with some of the fastest growing technology companies out there. In comparison, another high flyer Apple Inc (AAPL) has a P/E of 16, a P/S ratio of 3.27 and a P/B ratio of 4.8. Clearly illustrating just how expensive Chipotle’s stock is.
Despite its substantial overvaluation levels (by any traditional measure) Chipotle was able to demonstrate significant growth in most of its metrics over the last 8 years. During this time revenue grew 341%, net income increased by 768%, book value grew 273% and shareholders’ equity increased 225%. While an impressive performance, the numbers above do NOT justify the 1,465% rise in the company’s stock price.
We must now go back to 2006 and study the company in greater detail in order to determine why the company was selling at such an expensive valuation back then and what was the catalyst behind its stock price going even higher. Most importantly, we have to figure out if we would have been smart enough to take a long position in either 2006 or 2008/09.
Chipotle’s fundamental growth and investment story is best understood if we break it down into 3 categories.
- New Store Growth
- Margin Improvement
- New Concepts & Future Growth
By the time the company went public in 2006, Chipotle had 500 restaurants and growing at approximately 100 additional stores per annum. By the end of fiscal 2013 the company operated 1,595 restaurants, with 185 stores being opened in 2013 alone.
To Be Continued Tomorrow…..
Why You Should Have Bought Chipotle’s Stock Instead Of A Burrito Google