Chipotle (NYSE: CMG ) may look like a pricey stock, but its sizzling fourth-quarter results explain why investors have been paying up for a piece of the action.
Fourth-quarter net income increased 47%, to $46.4 million, or $1.47 per share. Chipotle's revenue surged 24.5%, to $482.5 million, while comparable restaurant sales jumped 12.6%. Better yet, customer traffic growth -- not menu price hikes -- drove that strong increase in same-restaurant sales. Chipotle also raised restaurant-level operating margin by 140 basis points to 25.9%.
Rival Buffalo Wild Wings' (Nasdaq: BWLD ) most recent quarter was pretty tepid, making the stock look too expensive. By comparison, I think Chipotle's quarterly results really deserve to drum up the excitement their seemingly high stock price implies.
Buffalo Wild Wings touts "sports, wings, and beer" as a major part of its formula for success, but Chipotle's got a truly lofty sense of purpose stuffed into its burritos. Through its "Food with Integrity" mission, Chipotle serves up food that's "sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food."
Chipotle's attitude toward ingredient selection is -- and has been -- ahead of the curve, which also puts it ahead of many rivals. As more consumers begin to shun factory farming, companies are recognizing that they need to do a better job of seeking more humane profits. Chipotle's got first-mover advantage in that respect, which helps the company differentiate itself from other quick-serve restaurants.
At 41 times forward earnings, Chipotle's seemingly pricey multiple could give value-minded investors a major pause. That dizzyingly high number makes Buffalo Wild Wings' forward price-to-earnings ratio of 21 appear (emphasis on appear) to be a bargain. Then compare those multiples to those of McDonald's (NYSE: MCD ) and Yum! Brands (NYSE: YUM ) , which trade at 14 and 16 times forward earnings, respectively.
Chipotle's stock may not look like a steal, but its solid corporate mission of affordable, high-quality food, and the heady growth it already delivers, indicate a promising future. What looks expensive now should end up a bargain in the long run.
What do you think? Can Chipotle keep up its amazing growth? Let us know in the comments box below.