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I love going to Chipotle! Every time I go, the stores are clean, the food is tasty and there is usually a line of people waiting. But is that enough?
  • Valuation - CMG is the most expensive restaurant stock on the planet.
  • Peak Margins Right now CMG is the only restaurant company with double digit EBIT margins. In the world before rampant food inflation, labor inflation and consumer distress the best run restaurant companies barely achieved double-digit EBIT margins. To be clear, we are not talking about those companies that generate most of their revenues from a royalty stream. In the heyday when P.F. Chang's and The Cheesecake Factory were trading at 40x EPS, they generated EBIT margins around 10%.
  • Same-Store SalesGiven the current economic environment, CMG's same-store sales are in a class of their own. Over the past two quarters the company has posted same-store sales of 10.6% and 10.2%, respectively. Looking out over the balance of 2008, CMG's same-store sales are likely to slow to mid-single digit growth. In 1Q08, CMG did benefit from an easy 8.3% comparison due to a tough winter last year. For the next two quarters comparisons get more difficult at 11.6% and 12.4%, respectively.
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