Chipotle's Second Chance

Chipotle Mexican Grill's (NYSE: CMG  ) (NYSE: CMG-B  ) shares are on the downslide after the burrito chain reported its fourth-quarter results. However, investors who might have been scared off by Chipotle's ever-increasing stock price may now find it far more appetizing.

Fourth-quarter net income increased 61.8% to $17.5 million, or $0.53 per share (including a $0.01-per-share charge related to taxes). Chipotle's revenue increased 31.5% to $288.9 million, while same-store sales rocketed 10.6% higher.

That may sound good, but it wasn't good enough for some investors earlier today (although shares are starting to recover). Chipotle's fourth quarter missed analysts' expectation for earnings of $0.55 per share. And while the company's forecast of 25% greater earnings in 2008 is impressive amid this challenging macroeconomic environment, it's still a far cry from the company's 66% increase in earnings in 2007.

The projected 2008 growth must sound awfully slow compared to Chipotle's usual pace, but it's not far below analysts' expectations for 28% growth in 2008, so a slowdown from Chipotle's earlier breakneck gains wasn't exactly unexpected.

Perhaps we can forgive Chipotle for predicting "just" 25% earnings growth in 2008 -- many restaurant companies would envy such an outlook. Just look at Wendy's (NYSE: WEN  ) . In addition to struggling with its core restaurants, it was forced to spin off its Tim Hortons (NYSE: THI  ) chain, and it struck out with its Baja Fresh Mexican concept. Even Panera (Nasdaq: PNRA  ) , which tends to rake in impressive revenue growth, hasn't delivered fired-up profits for the last several years.  

Meanwhile, as signs of an economic slump accumulate, I'd rather side with companies that have strong positions. (Former Chipotle parent McDonald's (NYSE: MCD  ) is still lovin' it, for example.) And it seems to me that Chipotle's quick, delicious, natural food and its reasonable prices should be fairly recession-proof.

Chipotle is a quality company that's looking far more appetizing now that its shares have fallen well below their 52-week high. After all, back in October, I couldn't help but wonder whether it had simply become overstuffed with optimism. Given Chipotle's strong growth and bright future (I think the company could exceed conservative expectations in the years ahead), the stock's much more appetizing now than it was several months ago.  

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