Analyzing Chipotle’s Valuation Multiple


Jun. 5 2019, Updated 11:54 a.m. ET

Valuation multiple

The recent decline in Chipotle Mexican Grill’s (CMG) stock price lowered its valuation multiple. As of June 4, the company was trading at a forward PE ratio of 45.6x—compared to 49.6x as of May 20. On the same day, Shake Shack (SHAK) and McDonald’s (MCD) were trading at forward PE ratios of 97.9x and 24.0x, respectively. With Shake Shack still in the growth phase, it has considerable scope to expand. Shake Shack is valued highly by the market. As a result, Shake Shack has a higher valuation multiple.

On June 4, Chipotle was trading at 50.7x analysts’ 2019 EPS estimate of $13.05 and at 39.5x analysts’ 2020 EPS estimate of $16.75. The company’s EPS is expected to rise 44.1% in 2019 and 28.4% in 2020.

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Analysts’ recommendations

On May 23, BMO downgraded Chipotle to “underperform” from “market perform.” BMO lowered the target price from $675 to $620. Piper Jaffray, Cowen and Company, BTIG, Wedbush, J.P. Morgan, and UBS raised their 12-month target price for Chipotle after it posted its first-quarter earnings.

Analysts favor a “hold” rating for Chipotle. For Chipotle, 48.4% of the 31 analysts that cover the company recommended a “hold,” while 32.3% recommended a “buy” and 19.4% recommended a “sell.” Analysts’ 12-month target price for Chipotle is $681.67, which represents a potential upside of 2.9% from its stock price of $662.18.

Peer comparisons

Analysts favor a “hold” rating for Shake Shack. For Shake Shack, 63.6% of the 11 analysts that cover the company recommended a “hold,” 27.3% recommended a “buy,” and 9.1% recommended a “sell.” On average, analysts have given Shake Shack a 12-month target price of $60.63, which implies a fall of 0.6% from its stock price of $60.99.

Among the 30 analysts that cover McDonald’s (MCD), 76.7% recommended a “buy,” while 23.3% recommended a “hold.” On average, analysts have given McDonald’s a 12-month target price of $215.0 with return potential of 7.7% from its stock price of $199.63.


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