Investors like property stock split. These events do nothing more than divide a pie of the same size into smaller pieces, but they only occur after a company’s stock price has skyrocketed, which usually indicates that the company is doing quite well. Better yet, when management decides to split a company’s stock, it implies that they believe there will be more growth to come.
Chipotle Mexican Grill (NYSE:CMG) impressed Wall Street last March with the announcement of a stock split with one of the highest multiples ever recorded: each current share will be divided into 50 new shares. The change should take place on June 25 for shareholders registered on June 18.
So, is now the time to buy Chipotle?
Chipotle stock looks unstoppable
Chipotle has been an incredible stock to own over its life as a public company, and while it has had some rough times, it has absolutely crushed the market. S&P500 over the last five years as well as over most other periods.
He created a fast-casual model that generated incredible customer loyalty, sales and profits – and it was difficult to replicate. It is known for selling healthy and fresh Mexican dishes at average prices; it’s more expensive than the typical fast food chain, but significantly less expensive than the standard sit-down restaurant. It targets a more affluent clientele, who tend to be more resilient in times of economic volatility, and it has demonstrated strong performance in recent years despite the pandemic and subsequent surge in inflation. It is also incredibly profitable, with high and growing margins and net profit.
Other chains have attempted to imitate its model and performance, and many new competitors have been touted as “the next Chipotle.” But whatever his secret sauce, he continues to stand out from his peers. As CEO Brian Niccol recently joked, “The next Chipotle is Chipotle.”
Consider its operating margins compared to those of Soft green, Shake ShackAnd How are you Band.
What is the next step ?
Chipotle already has more than 3,000 restaurants, but it aims to have 7,000 in North America alone. It’s quite saturated in large urban markets and is now going after small towns and suburban areas where many of its affluent customers live. It is also intensifying its presence in Canada.
It already has a few stores in some European markets, giving it plenty of opportunities to expand internationally, and recently launched its first franchise partnerships for stores in the Middle East. Otherwise, all of its sites are owned by the company.
Management also sees a flywheel effect in its activity which creates opportunities for leverage and efficiency. By retaining a strong employee base and training them for leadership roles, its stores operate better, with faster service and higher transaction rates.
Is now the time to buy?
Since investors love stock splits, Chipotle stock rose following the announcement that it was coming….
