Chipotle (CMG 1.85%) is seeing no signs of an impending slump in its business. In a late-April earnings report, the fast-food specialist revealed strong customer traffic trends and expanding profitability even as consumers pulled back spending in some discretionary niches.

Let's take a look at the burrito chain's first-quarter update, which covered the selling period that ended in late March, and what it says about shareholders' prospects for continued strong returns through the rest of 2023.

Solid sales trends

Chipotle's business is clearly in growth mode. Comparable-store sales gains sped up to an 11% rate from 6% in the prior quarter. Add in an expanding store base and strong demand for digital sales, and overall revenue rose 17% to $2.4 billion.

The company benefited from a strong fast-food industry as consumers looked to offset some of the cost of rising grocery prices. Rival McDonald's (NYSE: MCD) posted a 13% comps increase in the core U.S. market, thanks to rising traffic and higher spending per visit. Yet, Chipotle also improved its market share by lifting service levels and leaning heavily on the drive-thru and to-go channels.

CEO Brian Niccol said in a press release, "Our strong performance confirms that our focus on getting back to basics and reestablishing Chipotle's standards of excellence is beginning to drive results."

Cash and profits

Faster growth makes it easier to boost profits, especially in the context of rising prices. Chipotle achieved a 15.5% operating margin in Q1, up from 9.4% a year ago. The company still has work to do to get its profitability back up near the record set by the business of nearly 18% of sales. Yet the trend is clearly positive on this score.

CMG Operating Margin (TTM) Chart.

CMG Operating Margin (TTM) data by YCharts.

The drive-thru initiative is lifting margins in 2023, and earnings also got a boost from the menu price increases that rolled out over the past year. The business is still seeing pressure from higher costs in areas like wages and ingredients like cheese and salsa. However, Chipotle is proving that it can handle these spikes without sacrificing sales volumes. Non-GAAP (adjusted) profit improved to $292 million from $161 million a year ago.

Looking ahead

Executives are projecting more growth ahead, with comps rising in the mid to high single-digit range in the second quarter. It is full speed ahead for the expansion plan, too, as nearly 300 new restaurants will launch in that period. Growth is tilted toward more rural locations and spots that should see strong drive-thru traffic.

The biggest risk for investors is in overpaying for this high level of performance. Chipotle's stock is valued at nearly 6 times annual sales compared to a price-to-sales ratio of 4.8 for Restaurant Brands International, the owner of the Burger King and Tim Hortons franchises.

The Tex-Mex chain can continue earning that premium by steadily winning market share and expanding profit margins back toward the 20% level. As long as these positive growth trends continue, shareholders should see more market-beating returns by holding the stock.