Chipotle Mexican Grill (CMG 2.41%) is showing no signs of slowing down. The Tex-Mex fast-casual pioneer reported $2.5 billion of revenue and $10.36 of adjusted earnings per share in the last three months of 2023, both figures beat Wall Street estimates. Shares have moved higher since the announcement.

In the last year, this top restaurant stock has soared 64% (as of Feb. 9), a gain that exceeds the Nasdaq Composite index. And if we zoom out and look at the past five years, Chipotle's outperformance is jaw-dropping.

Is it time to buy shares in 2024? The answer to that question is a resounding yes, but only if you believe one thing.

Satisfying hungry customers

That revenue figure I just mentioned represented a 15.4% year-over-year gain. It was driven by strong same-store sales growth of 8.4%, which itself was boosted by higher ticket sizes and restaurant traffic.

In the last few years, Chipotle has been focusing heavily on bolstering its digital foundation. Part of this strategy includes a popular rewards program and a strong digital presence. And another facet is the success of its drive-thru locations, called Chipotlanes. These helped digital sales account for 36.1% of the company total in Q4.

Once again, Chipotle showed how profitable of an enterprise it is. The company's operating margin increased to 14.4% last quarter. Hiking menu prices to offset inflationary pressures with key inputs, like beef and queso, lifted the bottom line.

Rapid expansion

A key part of Chipotle's strategy is to open new restaurants at a rapid pace. In the past couple of years, the openings have accelerated, and are set to continue this year. After opening 271 new locations in 2023, the plan is to open between 285 and 315 this year. But there's still a sizable growth runway over the long term.

Listening to the executives, it's hard not to get excited about the company's prospects. CEO Brian Niccol is confident that there can be 7,000 Chipotle locations open in North America one day (compared to 3,437 today). This number might be on the conservative side. This target of 7,000 is higher than the 6,000 that the business originally had set as the goal. Should the restaurants continue to perform well, the potential store count could go even higher.

It makes sense that management wants to be aggressive. On average, a Chipotle location brings in about $3 million in annual revenue, a figure that has risen over time. And the restaurant-level operating margin was 25.4% in Q4, demonstrating how profitable these stores are.

The goal is to generate $4 million in sales per store over time. At this level, the operating margin will likely be even higher. That's because Chipotle has been focused on driving greater operational improvements within the restaurants to sell more burritos and bowls at a faster pace.

No discount code

Thanks to Chipotle's impressive past performance, and momentum that continues to propel the stock, the current setup for investors might not be favorable. The market is offering up shares at a price-to-earnings ratio of 59.5. That's more than 100% more expensive than another dominant food and beverage chain, Starbucks, whose stock carries a P/E multiple of 26. This indicates the extreme optimism investors have for Chipotle.

If you're like me, then you have to believe the valuation is far too expensive right now. This perspective doesn't change even considering the company's growth runway and improving profitability.

Of course, if valuation is a factor you don't really prioritize, instead focusing solely on trying to buy high-quality businesses at whatever price the market gives, then owning this restaurant stock makes sense.