There's gold in them there carnitas! The eagerly anticipated Chipotle Mexican Grill
The deal was a success for parent company McDonald's
Chipotle is a fast-growing chain of 489 fast-yet-fresh Mexican food restaurants. McDonald's also owns Boston Market, but that company's publicly traded allure is tainted by its previous stint as floundering stock Boston Chicken.
The first-day surge valued Chipotle at more than $1.4 billion. That's a bit rich. Yes, Chipotle is profitable and growing quickly -- adding nearly 20% more stores to its base this year -- but what does this say for the intrinsic value of other chains like Wendy's
Yes, Chipotle is expanding swiftly. Sales grew by 33% through the first nine months of 2005. Profits are growing even faster, though that's coming off depressed levels during which time Chipotle was working on operating margins below the restaurant industry average. Profit growth is likely to be more in check from now on.
That doesn't mean that an investor should wait until the stock dips back to the original $22 offering price to scoop up Chipotle at a market value that would be the equivalent of last year's sales. That's not likely to happen anytime soon. However, it's unlikely that the stock will double from these levels over the next year. Expect a little stability in the coming weeks as investors come to grips with Chipotle as a more guarded growth vehicle. Once the stock has settled, perhaps a few bucks lower than where it is today -- but not a whole lot lower -- that's when a rational investor should consider going in for the first nibble.
Longtime Fool contributor Rick Munarriz is partial to Baja Fresh but may yet consider buying Chipotle -- when the price is right. He does not own shares in any of the companies in this story. T he Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.