It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Chipotle Mexican Grill, Inc. (NYSE:CMG) share price has soared 100% in the last three years. Most would be happy with that. In more good news, the share price has risen 5.0% in thirty days. We note that Chipotle Mexican Grill reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Chipotle Mexican Grill was able to grow its EPS at 55% per year over three years, sending the share price higher. This EPS growth is higher than the 26% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. Of course, with a P/E ratio of 79.72, the market remains optimistic.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Chipotle Mexican Grill has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Chipotle Mexican Grill's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Chipotle Mexican Grill has rewarded shareholders with a total shareholder return of 36% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9.2% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Chipotle Mexican Grill is showing 1 warning sign in our investment analysis , you should know about...
We will like Chipotle Mexican Grill better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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