Chipotle Mexican Grill (CMG 0.19%) has been one of the best-performing restaurant stocks ever since its IPO in 2006. Shares of the burrito chain have returned nearly 3,000% since its debut, and the stock is up 54% year-to-date as it's emerged as one of the favorites in the restaurant industry to gain market share during the pandemic. In fact, the company returned to comparable-sales growth in June, with comps rising 2%, and momentum improved in the first three weeks of July, up 6.4%.

With the exception of the few years that followed the E. coli outbreak that sunk the stock and the business's performance, Chipotle has been a paragon of excellence in the industry. When the business is healthy, profit margins have been better than almost any other fast-food competitor, and the company has a history of delivering strong comparable sales growth.

It's clear Chipotle has been a big winner for early investors as well as those who have come in since the food safety crisis, but can Chipotle still be a millionaire-maker stock for investors today? Let's take a closer look at what the stock has to offer.

A Chipotle burrito with a side of guac and some chips

Image source: Chipotle.

A hot burrito

Chipotle has bounced back strongly from the market sell-off in March as the company's investments in digital and delivery infrastructure have paid off. Digital sales in the second quarter more than tripled, jumping 216% from the year-ago quarter and making up 61% of total sales.  

The company also managed to turn a small profit in the quarter despite significant headwinds early in the period, and Chipotle is making adjustments for changes during the pandemic and beyond, rolling out more Chipotlanes -- what it calls its drive-thru option -- and expanding its delivery partnerships.

It's also adding new menu items like cauliflower rice and quesadillas, and has returned to opening new locations after a brief pause during the lockdowns. On the recent earnings call, management noted favorable conditions in the commercial real estate market, which should allow the company to get better locations at better prices in the near future.

CEO Brian Niccol also expressed confidence in the future, saying, "So we're feeling like we got all the components to really continue to have success with opening new restaurants, access to really good people, the right people capability and the operating model for these people to get trained and ready to roll and then, as you mentioned, the returns continue to be really, really strong because we're able to have access to really good real estate." 

Considering the company's momentum coming out of the lockdowns, its investments in digital and drive-thru, and challenges at competitors including small businesses, Chipotle should be able to pick up market share as the economy normalizes.

The fundamentals

The biggest concern about Chipotle stock isn't its business prospects, but the stock's valuation as it now trades at a sky-high price-to-earnings ratio of 126. While that is artificially raised by its recent pandemic-related challenges, the P/E ratio is still above 61 based on 2021 earnings estimates, meaning investors are paying a healthy premium for the stock compared to its restaurant peers. 

However, Chipotle's balance sheet is in rock-solid shape with more than $600 million in cash and no debt. The company also has considerably more room for growth ahead, as it is targeting at least 6,000 total restaurants over the long term, up from 2,669 total. Chipotle has never paid a dividend, but that doesn't seem out of the question over the long term as the company is consistently profitable and may decide to reward investors with a payout if its valuation normalizes.

Is it a millionaire maker?

While Chipotle's valuation presents some risk to investors as high expectations are baked in for the stock, it's hard to deny the upside potential here. Average unit volumes haven't yet reached their levels before the E. coli outbreak, showing room for improvement there, and the potential from digital orders, delivery, and drive-thru could drive average unit volumes up from $2.2 million currently to $3 million. Meanwhile, margins should improve as those channels will deliver more sales from the same asset base. 

Chipotle also seems to have bested the fast-casual competition as threats like Zoe's Kitchen, Noodles & Company, and Potbelly have floundered, showing that it isn't easy to create another national fast-food chain.

The valuation is certainly a risk here, but over the long term, the company has what it takes to continue to outperform the market. Keep your eye on the stock over the next quarter or two for some insight into how the business will look as the pandemic fades. With its current momentum, an earnings beat in October could send the stock even higher.