![]() With risky and rapid growth like described above (and shown in the table below) it should have been at least that high. That’s just an aside.Īssume that Chipotle’s discount rate was 15% during this period from 2012 through September 2015. coli, listeria, and other potential contaminants. And, for restaurants and other food-related companies, risks also include the danger of E. They also include regulatory change, potential industry and competitive threats. These risks include concentrations of all types. ![]() When I talk to business owners, I talk about addressing known risks while they are addressable. Unfortunately, we never know about most of the the curves in life until they happen. The train was running at a very rapid pace and hoping for no sharp curves ahead. This meant that same-store sales (for stores open more than a year) were rising at even more rapid rates. In spite of this rapid growth in the number of stores, average sales per store rose 6.8% (Line 2). Chipotle was opening stores at the rate of more than three every week during the period. This growth was fueled by a growth in the number of stores of 12.1%, with the store count increasing from 1,410 to 1,931 (Line 3). That’s a lot of market capitalization! The analysts and investors loved the stock, because the price/earnings multiple increased from 34x trailing earnings to about 50x trailing earnings by the end of 2014 (Line 9). Chipotle’s equity market capitalization rose from $9.45 billion to $23.40 billion (Line 7). Fueled by this rapid growth, the stock price grew at a 40% compounded rate from year-end 2012 to September 30, 2015, or from $297.46 per share to $750.25 per share (Line 6). Sales grew at 20.6% compounded over the period (Line 1 in figure below), with earnings per share growing an even faster 26.7% (Line 8). The third section examines the traditional valuation relationships between expected growth and risk to examine the current pricing of Chipotle in that light.Ĭhipotle’s Performance Through Third Quarter 2015Ĭhipotle’s performance, both as a company and as a stock, can be described as phenomonal for the period beginning 2012 through the end of the third quarter 2015.coli announcement, which has been followed by other, similar announcements regarding other stores around the nation, as well as the announcement of a class action lawsuit on behalf of E. The second section addresses performance since the initial E.coli in Chipotle stores located in the northwest. The first section addresses Chipotle’s performance between 2012 and mid-October 2015, or the period ending just before an outbreak of E.This post about Chipotle will come in three sections. ![]() Perhaps there is a lesson to pay attention to basics in the emerging situation at Chipotle Mexican Grill, Inc. When I see stories in the financial press I often think of what lessons business owners can learn from the experiences of others. This guest post first appeared on Chris’s blog on December 30, 2015. Christopher Mercer, ASA, CFA, ABAR, Founder and CEO of Mercer Capital, maintains a business valuation-themed blog at. ![]()
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