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Grading Chipotle's Most Recent Quarterly Performance

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Hint: It's not an "A."

Chipotle Mexican Grill (CMG 1.70%) has had some stellar performances despite numerous headwinds with the coronavirus and the recession. On a Fool Live episode recorded on Feb 4, Motley Fool contributors Brian Withers, Matthew Frankel, and Brian Feroldi discuss the burrito maker's latest quarter and the grade they'd give for its performance.

Matthew Frankel: If you were going to grade the companies that we talked about today, what grade would you give the one you talked about?

Brian Withers: I give Chipotle a "B" only just because of costs, and there's actually not a lot -- I mean, management is doing everything that they should be doing but just the restaurant business and COVID and all the things that are going on, they're going to struggle a little bit on the profitability.

Brian Feroldi: One thing you didn't know, Brian, is that Chipotle actually just raised prices.

Withers: They did. They are going to see that come through in Q1. They didn't provide any forward guidance because who knows what's going to happen. So it's not surprising.

Feroldi: They have the power to do so.

Withers: They do!

Frankel: They do.

Feroldi: They'll have to offset the extra costs that they have, especially on the app delivery side. I think Chipotle could raise prices for a long time. [laughs]

Withers: The only trouble I have with the stock is really the valuation. It's a heavy people business, too. They've got to have brick-and-mortar stuff. They've got to continue to hire people. They have, like, 33,000 employees, so it's a really people- and asset-heavy company. Although I forgot to say they have over a billion dollars in cash. They've got a $600 [million] credit line that they haven't used, haven't needed to use. They're profitable, cash flow positive. No wonder the market is paying them up.

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Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,294.11 (1.70%) $21.62

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