Does Chipotle Mexican Grill Inc’s (CMG) Past Performance Indicate A Stronger Future?
In this commentary, I will examine Chipotle Mexican Grill Inc’s (NYSE:CMG) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the hotels, restaurants and leisure industry performed. As an investor, I find it beneficial to assess CMG’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Chipotle Mexican Grill
How Well Did CMG Perform?
I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to examine many different companies in a uniform manner using the most relevant data points. Chipotle Mexican Grill’s latest earnings is $148M, which, in comparison to the previous year’s figure, has jumped by a non-trivial 98.34%. Given that these values are somewhat short-term thinking, I have estimated an annualized five-year value for CMG’s earnings, which stands at $279M. This means while earnings growth from last year was positive, over time, Chipotle Mexican Grill’s earnings have been declining on average.
Why is this? Well, let’s take a look at what’s transpiring with margins and if the entire industry is experiencing the hit as well. Revenue growth in the last couple of years, has been positive, yet earnings growth has been deteriorating. This means Chipotle Mexican Grill has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US hotels, restaurants and leisure industry has been growing its average earnings by double-digit 12.42% in the past year, and 15.34% over the previous few years. This suggests that any tailwind the industry is profiting from, Chipotle Mexican Grill is capable of leveraging this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There may be variables that are influencing the industry as a whole, hence the high industry growth rate over the same period of time. I suggest you continue to research Chipotle Mexican Grill to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CMG’s future growth? Take a look at our free research report of analyst consensus for CMG’s outlook.
2. Financial Health: Is CMG’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
