Chipotle Mexican Grill's (CMG 4.49%) extraordinary leap to the top of the food (or restaurant) chain has yielded thousands of percentage points in gains for loyal investors. Chipotle's share price has reached so high that it's undertaking a 50-for-1 split this week.
Stock splits often reflect management's confidence that the stock price can go still higher. Let's see where we can expect Chipotle to be five years from now.
Much bigger
This chain of fast-casual restaurants serves fresh, healthy Mexican-style fare. It sources local produce and touts that it uses only 53 ingredients (all of which you can pronounce) and has no freezers on its premises -- everything is made fresh, every day. It has created a model food-preparation process that ensures meals meet its standards and please customers.
The chain has a low number of menu items so that food can be prepared quickly and freshly, and management has an innovation-driven culture. That has resulted in some popular new dishes and a focus on digital and delivery, bringing it into the omnichannel era.
NYSE: CMG
Key Data Points
All of this is driving high customer adoption and retention rates, illustrated by consistently strong revenue and comparable-store sales (comps) growth. Sales increased 14% year over year in the 2024 first quarter, including a 7% hike in comps.
The concept is so popular that Chipotle is expanding into new regions to meet high demand. Despite its widespread presence in many urban areas, it sees the opportunity to expand further and is targeting the suburban neighborhoods where many of its affluent consumers live.
Management thinks it can double its store count from the 3,500 it has today to reach 7,000 in North America alone. It plans to open about 300 stores this year, and at that rate, it should have around 5,000 in five years.
That itself is a huge growth driver, and with Chipotle's reliable comps growth, it's a double boost for increasing total revenue. It also still gives it more room to keep expanding over the next several years.
A stronger international presence
Chipotle has a handful of restaurants outside of North America, but it's expanding globally. Its 68 stores in the U.K., Germany, and France are all company owned, and it recently signed its first-ever franchise agreement for restaurants in the Middle East.
This could be an interesting and lucrative change for Chipotle, and the company is clearly taking it very slowly. It hadn't entered a new country in 10 years before signing the franchise agreement, with its first store opening in Kuwait. It also hasn't expanded extensively in the three European countries where it operates. However, management said that it's going to speed up openings both in North America and internationally.
While the chain is still rapidly growing on its home turf, it makes sense to hold off on a grand international expansion plan. In five years, it should have a broader presence in new countries outside of North America and potentially more franchised stores, which are a whole new kettle of fish. But they are a high-margin business and could add a lot to the company as a whole.
A higher stock price
Chipotle stock is up nearly 300% over the past five years, and if you chart its revenue and earnings growth, you'll see why.
CMG data by YCharts; EPS = earnings per share.
If it can sustain its high growth and wide margins, it can conceivably accomplish this feat again over the next five years.
Chipotle shares trade at a high price-to-earnings multiple of near 69, which prices in strong growth. If growth slows, the stock won't be able to sustain such a premium valuation, and its price won't climb quite as fast. But even if that happens, investors are still likely to enjoy market-beating gains.
