Weighing The Pros And Cons Of Chipotle Mexican Grill

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Chipotle Mexican Grill (CMG) has been a standout performer in the restaurant industry for several years now. However, its shares fell by nearly 6% in a single session after investors weren’t too pleased with its recent earnings report. Altogether, the stock has corrected nearly 20% since its March high of $622.90. Can the stock bounce back from here? Or will it continue its slide? Let’s take a look at the pros and cons.

Pros

1. Quality food with integrity
The company is driven by a strong set of values, even if some of those decisions increase its costs internally. This is especially the case with the sourcing of its ingredients and meats. In fact, the high-quality ingredients and advanced cooking methods used by Chipotle are second to no other fast-food chain. Among recent developments, the leader in fast-casual dining concepts plans to become absolutely GMO-free by the end of 2014. Although the aim is not new, it shows Chipotle’s commitment to bring fresh ingredients to the table. Besides offering high-quality meals to its customers, the portions are generously sized and the value is unmatched. There are very few places that can fill you up for less that $10 with quality food, and not junk. The triad of fresh, pure ingredients, cutting-edge cooking methods, and tremendous portions gives Chipotle a mouthwatering appeal.

2. Expansion
New restaurant openings and comparable restaurant sales increases are important factors contributing to Chipotle’s increase in revenues in recent years.

As illustrated in the table above, the company has increased its restaurant-count by nearly 14% over the last three years. The management expects to open around 180-195 new restaurants this year. With that aim, Chipotle has already unveiled 44...

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...y ingredients in markets like China and India would be an arduous task. The commitment of quality may not be viable in most developing nations at present, which would keep Chipotle from meaningfully entering or expanding in these fast-growing markets. Ultimately, it would be a trade-off between growth and quality until the ingredient become widely available.

Conclusion
Although I am convinced that Chipotle is a wonderful concept with a proven track record as well as significant brand presence in the US, the return that an investor receives depends on the price paid for the shares, and with respect to that Chipotle doesn’t seem great. There is no doubt that the company has a lot of room for growth, even within the US, however it is likely to face considerable headwinds as it grows larger and larger. In view of such factors, the cons outweigh the pros of the stock.

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