One of the ways investing in the stock market can be fun is by giving you the opportunity to buy shares in companies whose products you purchase frequently. Names like Nike (NYSE:NKE) and Chipotle (NYSE:CMG) have built strong brands that are loved not only by consumers, but by investors as well. 

Both stocks have five-year returns that exceed the S&P 500's 73% gain during that time. 

But investors aren't fixated on the past. What matters are future returns. Should you add the sports apparel juggernaut or the fast-casual dining pioneer to your portfolio?

rising stacks of cash

Image source: Getty Images.

The case for Nike 

Nike grew sales 6.3% per year from fiscal 2015 through fiscal 2019. But revenue in fiscal 2020 fell from the prior year as the company was hurt in the fourth quarter (ended May 31) by the coronavirus pandemic. 

The closure of retail locations and the stoppage of professional sports took a toll on the business. But Nike was in a great position to accelerate the focus on its digital capabilities. During the first quarter of 2021, Nike Brand digital sales increased 82% from the prior-year period. 

Nike is executing so well on its direct-to-consumer strategy that management has now set its goal even higher. Starting in fiscal year 2021, the company expects to reach 50% digital penetration as part of its new Consumer Direct Acceleration initiative. "Our digital business is already meeting our mix goal of 30%, nearly three years ahead of schedule, and we will continue to grow from here," said CEO John Donahoe on the most recent earnings call. 

As a truly global brand, Nike generated only 40% of its revenue from North America in the most recent quarter. Greater China will be the company's growth engine: It recorded the highest gain on a percentage basis in the first quarter of 2021 out of all regions. Nike's Greater China division also achieves the highest operating margin, so as more sales are made there, the margin for the overall company will get a lift. 

Humans' love of sport, entertainment, and competition will never go away, and Nike is set to continue profiting from this. It is the dominant player in this industry, and its ability to build strong connections with its consumers, coupled with international expansion opportunities, makes it an attractive business to own. 

The case for Chipotle 

After an E. coli outbreak a few years ago, investors thought Chipotle would never be able to recover. From late 2015 to the start of 2018, the stock price cratered more than halfServing food made from fresh ingredients is not easy, and Chipotle learned this lesson the hard way. 

But management took the subsequent challenge head on, improving food-handling and preparation processes, and showcasing its transparency along the way. Since hitting a low in 2016 of $22.9 million, profits have soared to reach $350.2 million in 2019. 

The business has been thriving even as the pandemic continues to rock the economy. Chipotle's digital sales in the three months ended June 30 (which were most affected by the pandemic) skyrocketed over 200% from the previous year, and this figure stood above 200% in the most recent quarter as well. 

The company received a boost from its impressive rewards program, which launched in March 2019 and now has 17 million enrolled members. Starbucks, whose loyalty program is revered by many as one of the best in the business, counted 19.3 million members at the end of its most recent quarter. But it launched more than 10 years prior to Chipotle's. 

Chipotle's mobile app and rewards program will only strengthen the company's resonance with consumers, while providing the business with important data about their dining habits. It says the digital mix of overall sales is in the "high 40s," with technology propelling the business. 

And the company just announced that it is opening its first digital-only restaurant, with pick-up and delivery capabilities only. This design will enable the penetration into more urban areas that don't have the space for a full-size location. 

But with the stock selling at a P/E ratio of 151, Wall Street's optimism may already be priced in.

The final verdict 

Both Nike and Chipotle are quality businesses and leaders in their respective industries, and they've done a wonderful job using technology to fuel growth. 

However, I think Chipotle is the better stock, since the company still has a lot of room to grow. Management believes the company's store count can double in the United States, from its current number of nearly 2,700 locations. This vision is bolstered by the recent success of the Chipotlane restaurants, which feature a drive-thru and lead to an increase in new restaurant sales, margins, and returns. Better-performing new stores will translate into expanding margins and higher profits for the business over the long term.

The company also hasn't even scratched the surface with its potential in Europe. If its success there remotely resembles anything like the U.S., then revenue and profits have a really long way to grow. 

As many independent restaurants struggle to survive during the pandemic, Chipotle has a golden opportunity to steal market share. Its burgeoning rewards program, aggressive store opening plan, and global ambitions make it the better buy right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.