Chipotle Mexican Grill (CMG +0.28%) stock has trended downward since 2024, and even when measured against its 52-week high, it is down by 39%. The fast-casual giant that became popular for its healthier food has fallen victim to shifting consumer preferences and the economic challenges facing its customers.
Now, investors await July 29, when the company will release its second-quarter results. But is the stock worth buying before the earnings release, or should investors remain on the sidelines until they get the latest numbers?
Image source: The Motley Fool.
The state of Chipotle today
Shareholders have had little to celebrate about Chipotle's performance in recent quarters.
In Q1, its comparable-store sales rose by just 0.5%. That's a stark contrast to Q1 2024, when comparable sales grew by 7%. Moreover, its operating margin in Q1 was 12.9%, down from 16.7% one year ago and 16.3% in Q1 2024, just before Chipotle underwent a 50-for-1 stock split.
That split closely coincided with the stock's all-time high. Since then, rising inflation has hammered U.S. consumers. At the same time, Chipotle has faced higher rent, labor, and food costs, squeezing its margins. Such challenges are not unique to Chipotle, but they still have weighed on the company.
Additionally, two years ago, Brian Niccol was its CEO. After he departed for Starbucks in mid-2024, former COO Scott Boatwright took over as CEO. Even though Boatwright previously oversaw many of Niccol's initiatives, he has so far failed to develop an effective turnaround strategy for the chain.
Investors have little reason to expect dramatic improvements in the near term. For the quarter, analysts forecast 8.7% yearly revenue growth. That would be a sequential improvement from its 7.4% in Q1, but well below the 18.2% revenue growth it reported in the second quarter of 2024.
NYSE: CMG
Key Data Points
Nonetheless, the stock price may now better reflect the challenges the company faces. After its sell-off, Chipotle's P/E ratio has fallen to 29, matching the S&P 500's average earnings multiple. Between 2018 and 2025, the company's P/E ratio rarely fell below 50.
Hence, while today's earnings multiple may seem like a bargain compared to past valuations, that lower P/E ratio appears to signal a loss of confidence in Chipotle's ability to recover.
Should investors buy Chipotle stock before July 29?
Considering the state of Chipotle's business, investors have no obvious reasons to buy shares before July 29.
Most of its problems do not appear to be unique to the fast casual restaurant chain. Also, a slight improvement in revenue growth could provide a much-needed updraft to the stock price.
Unfortunately, the rapid growth that kept its valuation high and drove its stock price higher in past years has ended, and it is unclear if or when Chipotle could reignite it.
While its P/E ratio has fallen significantly, Chipotle's earnings multiple would have to fall further before one might reasonably call it a value stock. Given that it has neither a low valuation nor an obvious path back to significantly faster revenue growth, this consumer discretionary stock is probably not a buy at this time.
