This article is part of our Rising Star Portfolio series.
Darn it, Chipotle
Chipotle's first-quarter net income increased 23.7% to $57.5 million, or $1.81 per share. Analysts had expected earnings of $1.83 per share for the quarter. Revenue increased by 23.7% to $596.7 million, and same-restaurant sales surged an extremely impressive 11.1%.
In keeping with themes recently displayed at fast-food rivals like McDonald's
Chipotle's shares weakened a bit after the report, which we also covered here, but the stock's still flirting with its 52-week high. It's incredibly difficult to bring oneself to buy a burrito restaurant stock that's trading at 34 times forward earnings and sports a PEG ratio of 1.94.
I've been eyeing this stock for the socially responsible Rising Stars portfolio I manage for Fool.com. Its "Food with Integrity" mission, which includes the use of organic and natural ingredients when at all possible, would make it an excellent fit. In November, I bought shares of Darden Restaurants
It may be misguided to anchor too firmly on Chipotle's high multiples given its potential. As far as Chipotle's high stock price goes, I've often mulled the notion that this company faces great growth prospects because of its resemblance to another stock I've bought for that portfolio, Whole Foods Market
Just like it's a mistake to think of Whole Foods as "just another grocery stock" or Starbucks (also present in the portfolio) as "just another coffee stock," Chipotle is more than just another fast-food restaurant stock. All of these companies have more-lofty ideals built into their businesses beyond simply making profits.
Chipotle's also testing out ShopHouse Southeast Asian Kitchen in the Washington, D.C. market, a concept that's "well-received," although management won't reveal whether it has plans to open more locations in other markets. Chipotle's also opening stores in overseas markets like London, Paris, and Germany, adding more food for thought when it comes to future growth that could make today's stock price far more palatable.
So I'm left salivating over Chipotle while fretting about the high multiples; it's firmly on my Watchlist, though. Would you buy now, or wait? Add your thoughts in the comments box below.
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