September 11, 2009 - Chipotle Mexican Grill, Inc. (CMG-NYSE) engages in the development and operation of fast-casual, fresh Mexican food restaurants in the United States and Canada. Its restaurants serve a focused menu of tacos, burritos, salads, and burrito bowls. As of December 31, 2008, the company operated 837 restaurants in 33 states throughout the United States and in the District of Columbia; and Toronto, Canada. Chipotle Mexican Grill was founded in 1993 and is based in Denver, Colorado.

Revenues continue to climb and have every year since 2006, going from $822.9 million to $1.085 billion, then $1.332 billion. This year, analysts' consensus (18 of them) is for $1.52 billion, up another 14.4%. Next year, they see $1.73 billion. In the second quarter of this year, sales were up 14% compared to last year's same period. That improvement came from adding new restaurants as well as a 1.7% increase in same-store sales.

Profits are doing even better. Operating margins reached an all-time at 26% in the quarter. Higher prices on the menu (up 6.5%), lower marketing costs, and more efficient labor staffing all contributed to the better number. Helping out were lower prices for cheese, beef and pork. Added altogether, profits were up 50% to $1.10 (vs. 74 cents in second quarter last year).

Commodity prices for its main ingredients should stay low for a while, helping the third and fourth quarter results. But new restaurants will continue to open, as management is determined to have 120 to 130 new ones opened in 2009. These new establishments have high start-up costs that will hurt profitability for a short time. So far, the company added 50 in the first half of the year with plans for another 50 to 55 in the fourth quarter.

While revenues are up, they're slowing down. Last year in the second quarter, same-store sales were up 7.1% compared to the previous year (vs up 1.7% in this year's second quarter). Traffic was down 3.6% in the second quarter. A combination of higher prices and the recession kept some customers from returning. If unemployment stays high or grows, this is a concern for Chipotle investors.

More numbers: Market cap is $2.8 billion. Forward P/E is 22.76. Price to book is 4.33. Operating margin for the last 12 months was 11.7% with a Profit margin of 6.8%. Total cash is $208.30 million. Total cash per share is $6.58. Current ratio is 2.96. Book value per share is $20.51. Beta is 1.26. 52-week high was $97.21, set on July 29 of this year. The 52-week low was $36.86, hit on November 21, 2008. There are 31.64 million shares outstanding. Insiders own 4.39%. There is no dividend.

While some of the numbers (like price to book and P/E) are high, this is a stock that once had values much higher. With strong growth anticipated over the next 5 years (revenues' average annual increase of 19% and earnings' average annual improvement of 21%), this stock can handle a loftier multiple. As long as it delivers. New restaurants, once over their initial start-up costs, will certainly add to the bottom line. And once the recession is in the rear view mirror, the company is well positioned to boost all expectations.

- Company Web site: www.chipotle.com

- Ted Allrich