Chipotle Mexican GrillCMG1310,76 $
Chipotle Mexican Grill (NYSE: CMG) American chain of fast food restaurants, which serves mainly Mexican cuisine.
About company
For 30 years of development Chipotle has grown from one restaurant to a large international chain, which at the end of 2021 had 2918 American restaurants and 44 restaurants outside the US - in Canada and the UK.
The company has a high share of online orders: digital sales, including delivery, pickup and Chipotlanes format, allowed the network to earn about $3.4 billion in 2021, what constitutes 46% in overall Chipotle results. The company's overall revenue structure is as follows:
- Offline - 54%.
- Online - 46%.
Market
The Mexican food market in the US and Canada almost doubled between 2011 and 2021, from 39.74 to 66.87 billion dollars, which implies an average annual growth rate of 5,4%.
According to Technavio research, the average annual growth rate of the market for Mexican cuisine in the world in the next five years will accelerate to 6,65%. American companies will be the main beneficiaries, since the main growth will be recorded in North America:
- Chipotle Mexican Grill.
- Del Taco Restaurants.
- QDOBA Mexican Eats.
- Moe’s Southwest Grill.
- Chick-fil-A.
- The Meson Sandwiches.
- Food Concepts International.
- CV SAB group.
- Grupo Bimbo SAB de CV.
- MTY Food Group.
- Pappas Restaurants.
- Yum! Brands.
Current results and comparison with competitors
Chipotle - American Growth Story: the company increases its financial performance annually by an average of 15%. In 2022, the pattern will break, because the company, according to management, will show growth less 10% on the back of strong results last year, when sales increased by 26%.
Besides, management plans to increase its own network by 2022 8% – up to 3216 restaurants. The coronavirus pandemic remains the main deterrent.
Financial results of the company, billion US dollars
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|
| Revenue | 3,904 | 4,476 | 4,865 | 5,586 | 5,985 | 7,547 |
| EBITDA | 0,181 | 0,434 | 0,460 | 0,657 | 0,528 | 1,060 |
| Net profit | 0,022 | 0,175 | 0,175 | 0,349 | 0,356 | 0,653 |
| net debt | −0,087 | −0,184 | −0,249 | −0,480 | −0,608 | −0,815 |
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| Chipotle Mexican Grill | 38,73 | 64,11 | −0,77 |
| McDonald’s | 17,74 | 24,65 | 2,53 |
| Starbucks | 15,27 | 20,40 | 1,64 |
| Yum! Brands | 20,04 | 22,47 | 4,67 |
| Domino’s Pizza | 21,78 | 26,77 | 5,77 |
| Texas Roadhouse | 12,95 | 23,38 | −0,56 |
Arguments for
High growth rates. The company shows an impressive growth dynamics of financial results in comparison with competitors.
Average annual growth rates for the last 5 years in the fast food sector
| Chipotle Mexican Grill | +15% |
| Texas Roadhouse | +14% |
| Domino’s Pizza | +12% |
| Starbucks | +9% |
| McDonald’s | 0% |
| Yum! Brands | -6% |
15%
High visitor loyalty. Chipotle ranks second in the sector in the U.S. industry, second only to Chick-fil-A, and significantly outperforms competitors..
American customer loyalty index
| Chick-fil-A | 84 |
| Chipotle Mexican Grill | 80 |
| KFC | 79 |
| Arby’s | 79 |
| Domino’s Pizza | 79 |
| Subway | 79 |
| Panera Bread | 79 |
| Dunkin’ donuts | 79 |
| Papa John’s | 78 |
| Starbucks | 78 |
84
Protective online segment. Chipotle's digital business performed well during the pandemic: The company's sales in 2020 increased by 7% - and this despite the fact, that many chain restaurants were closed. To compare the results of competitors: McDonald's revenue fell by 9%, at Starbucks 14%, and at Texas Roadhouse 13%.
Outstripping growth. Double-digit growth allowed the shares of the American company to show more impressive dynamics compared to S&P 500 and industry competitors: Since the end of 2016, Chipotle's stock prices have risen by 463%.
Arguments against
No dividends. Chipotle does not pay dividends to shareholders, and investing in further growth. Trend, probably, continue, as in the medium term the company plans to open up to 7 thousand of its own restaurants in North America.
Evaluation. Chipotle multiples are among the highest in North America among industry competitors. This is mainly due to high visitor loyalty and faster growth compared to other companies in the sector..
What's the bottom line?
Chipotle is a promising American asset in the restaurant sector, which is growing faster than other companies in the industry and has an extremely high valuation. If investors are not deterred by the second fact, then the company can be safely added to your portfolio, but desirable by EV estimate / EBITDA less 30, or 1164 $ per share, and ideally at EV / EBITDA less 25, or 975 $ per share. In 2017-2020, shareholders had such an opportunity.
