Those who invested in Chipotle Mexican Grill (NYSE:CMG) five years ago are up 400%
Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. For example, the Chipotle Mexican Grill, Inc. (NYSE:CMG) share price is up a whopping 400% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It's down 1.2% in the last seven days.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Chipotle Mexican Grill
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Chipotle Mexican Grill managed to grow its earnings per share at 41% a year. This EPS growth is reasonably close to the 38% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Chipotle Mexican Grill's earnings, revenue and cash flow.
A Different Perspective
Although it hurts that Chipotle Mexican Grill returned a loss of 12% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Longer term investors wouldn't be so upset, since they would have made 38%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Chipotle Mexican Grill is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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