Be My Hot and Spicy Barbacoa, Chipotle

Spice up your Valentine's Day with even more smokin' hot investments.

If you like your stocks spicy -- and isn't that what Fired Up February is all about? -- then you may have the hots for Chipotle Mexican Grill (NYSE: CMG  ) (NYSE: CMG-B  ) .

The fast-growing chain of quick-service restaurants is bucking the trend of disappointing eatery stocks. Maybe it's that patrons have taken to the company's "food with integrity" mantra of sticking to family-farmed, organic ingredients, delivering both quality and double-digit comps gains along the way. Maybe it's the limited menu that makes even the longest of lines -- and Chipotle certainly knows how to draw a crowd -- disappear quickly as hungry customers are transformed into smiling, burrito-chomping regulars.

The secrets to Chipotle's success are several. The secret to Chipotle's stock is easier to explain. In fact, a picture tells a thousand verbs.

EPS

Analyst Est.

% Surprise

Q3 2007

$0.62

$0.53

17%

Q2 2007

$0.60

$0.45

33%

Q1 2007

$0.38

$0.32

19%

Q4 2006

$0.33

$0.28

18%

Q3 2006

$0.36

$0.27

33%

Q2 2006

$0.33

$0.25

32%

Q1 2006

$0.26

$0.12

117%

Q4 2005

$0.16

$0.11

45%

Source: Thomson First Call.

Yes, Chipotle has obliterated market expectations in each and every single quarter since going public two years ago. It hasn't even been close. Chipotle isn't just narrowly clocking in ahead of the pros. It's lapping past Wall Street's profit targets by double-digit percentage margins.

It's not the Tex-Mex concept, because its quick-service rivals have mostly struggled. Wendy's (NYSE: WEN  ) had to bail on Baja Fresh. CKE Restaurants (NYSE: CKR  ) has struggled with La Salsa. Don't even dare to introduce Yum! Brands' (NYSE: YUM  ) Taco Bell grub into this group.

Jack in the Box (NYSE: JBX  ) is the only company doing moderately well with its Qdoba chain, but it's certainly no Chipotle.

So what's more surprising -- that this concept is thriving in a sea of mediocrity, or that this cult of personality was spun off by the vanilla bean McDonald's (NYSE: MCD  ) behemoth?

And don't go thinking you're late to the party just because Chipotle is closing in on 700 locations. This is fast food where market leaders number in the thousands, if not the tens of thousands. Chipotle plans to tack on another 130-140 units this year, giving it plenty of room to grow.

Chipotle may not seem cheap at a lofty 40 times forward earnings, but you know what the company has done with those bottom-line targets in the past. The company's heady growth rate has also earned it a substantial market premium.

It doesn't surprise me that Chipotle has been recommended in both the Motley Fool Rule Breakers and Motley Fool Hidden Gems newsletters. Early adopters and gold-panning aficionados agree: Chipotle is hot.

It's also thematically fitting that Chipotle will wait until later tonight -- on Valentine's Day -- to present shareholders with its fourth-quarter results. It's never taken to the role of heartbreaker, so let's see if it continues to weave "food with integrity" into earnings with integrity.


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