After an optimistic start to 2023, the S&P 500 lost all of its year-to-date gains recently. Investors are still reeling from the Silicon Valley Bank failure, although many of the smaller bank stocks that had been dropping started to come back to life after the U.S. government announced that all Silicon Valley Bank depositors would get their funds back.
There's no telling how this will further unfold in the near term. In the meantime, you can shore up your portfolio with resilient stocks that have high potential, can withstand pressure, and are trading at bargain levels. Chipotle Mexican Grill (CMG 2.34%) is one such stock. Here are three reasons to buy it now.
NYSE: CMG
Key Data Points
1. Incredible pricing power
Many companies have been able to eke out small sales increases in recent quarters despite the pressured and inflationary environment, but many are also demonstrating drastically reduced profits. Chipotle has been able to raise its prices without curbing demand, leading to both increased sales and better profits. It sits in a resilient space, offering fast-casual food that appeals to an upscale clientele, but at affordable prices.
Revenue increased by 14% in 2022, while earnings per share increased by 40%. What demonstrates Chipotle's efficiency most effectively is that along with those stellar numbers, its operating margin has increased significantly, from 10.7% in 2021 to 13.4% in 2022. That's the opposite of pressure.
CMG Revenue (Annual) data by YCharts.
2. Huge growth opportunities
Management believes it can more than double the current store count. It opened 236 restaurants in 2022 -- the most new restaurants in six years -- to bring its total to 3,187.
CEO Brian Niccol upped his store count goal from 6,000 to 7,000, and the company is focusing on a small-town growth strategy, and has also set its sights on the Canadian and European markets. There are still plenty of location opportunities in its core markets as well, and Chipotle plans to accelerate its new store openings, adding between 255 and 285 in 2023.
New stores are obviously valuable for the added revenues they bring, but they also contribute to better unit economics, strengthening operating margins and the bottom line.
3. A compelling value
Chipotle stock isn't cheap right now. However, it never has really been cheap -- it has historically been given a premium valuation for the benefits it brings to the table (pun intended). Between the company's operational excellence and market opportunities, there are so many reasons to be confident about its stock.
However, even trading at what seems like a steep valuation of nearly 50 times trailing earnings, it's close to the cheapest it's been in five years, outside of the 2020 market crash.
CMG PE Ratio data by YCharts.
Chipotle is an excellent stock that offers both resilience and growth opportunities, and it could soar in a bull market.
