Chipotle Mexican Grill (CMG 2.41%) just reported its 2023 third quarter (for the period ended Sept. 30), posting revenue of $2.5 billion (up 11.3% year over year) and diluted earnings per share of $11.32 (up 23%). These numbers were well received by Wall Street, as shares were up about 5% since the announcement (as of Oct. 27). 

Chipotle's headline figures were certainly impressive once again. However, if we dig a bit deeper, we'll see that there was one key factor that helped drive the results. This would make even Warren Buffett appreciate this top restaurant stock. 

The clear sign of a great business 

The management team, led by CEO Brian Niccol, mentioned an important component that helped the business during the last three-month period. Chipotle's menu prices, on average, were up about 2.8% versus the year-ago period. This was due to the fact that the company decided to increase its prices in August of this year, which was the first time such a thing happened since June 2021. 

"We're really using menu pricing just to offset inflation," CFO Jack Hartung said on the Q3 2023 earnings call. Beef and queso were two items singled out that cost more. 

What's encouraging is that there are no signs that consumers are resisting, as sales have shown strong growth. What's more, Q3 transaction counts jumped 4%. 

Plus, there's evidence that Chipotle still has lots of untapped pricing power. A survey conducted by BTIG, a financial services firm, last year found that Chipotle's prices were cheaper than its key rivals, Qdoba and Moe's Southwest Grill. "Our value proposition has never been stronger," Niccol said during the call.  

The added benefit of pricing power is the positive impact it has on a company's profitability. In Q3, Chipotle's gross margin and operating margin expanded from the same period in 2022. 

"The single most important decision in evaluating a business is pricing power," Warren Buffett once said. "If you've got the power to raise prices without losing business to a competitor, you've got a very good business." 

Berkshire Hathaway, the conglomerate headed by the Oracle of Omaha, has 47% of its equities portfolio in Apple. The tech giant has shown over the years that it can price its popular products at the higher end of the spectrum, and customers will still rush to buy them. 

Is Chipotle stock a smart buy right now? 

Investors might be thinking that because of its proven pricing power, Chipotle stock is a no-brainer buy. But I don't necessarily view this as being the correct move, at least not right now. 

In the last five years, shares of this restaurant business have soared 331%, a gain that outpaces the S&P 500 by an incredibly wide margin. Due to this strong performance, the stock is expensive, trading at a price-to-earnings (P/E) ratio of 47.1. I believe this steep valuation might be the reason why Buffett doesn't own the stock. 

To be fair, Chipotle's growth in the last few years has been nothing short of spectacular, especially when you consider what transpired. The coronavirus pandemic decimated the restaurant sector. Then, there was surging inflation and rapidly rising interest rates. These days, the U.S. economy faces a lot of uncertainty in the near term. But this company just keeps humming along, posting outstanding financial results. 

I think the best thing to do is to add Chipotle to your watch list for now. Continue following and learning more about the business while practicing patience. The hope is that you can buy the stock at a more attractive valuation in the future.