With shares of Chipotle Mexican Grill (NYSE:CMG) trading around $378, is CMG an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Chipotle Mexican Grill operates restaurants throughout the United States, as well as two restaurants in Toronto, Canada and two in London, England. The company's restaurants serve a menu of burritos, tacos, burrito bowls, and salads. Chipotle Mexican Grill manages its operations and restaurants based on six regions that all report into a single segment. It prides itself in serving the best possible ingredients during a time when consumers are more keen to this detail. The company is well-positioned to see rising profits as consumers become more health conscious and opt for Chipotle Mexican Grill’s food items.
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T = Technicals on the Stock Chart are Strong
Chipotle Mexican Grill stock has formed an explosive move higher over the last several years. Currently, the stock is trading at highs for the year and looks like it wants to test all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Chipotle Mexican Grill is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Chipotle Mexican Grill options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Chipotle Mexican Grill Options | 23.16% | 3% | 0% |
What does this mean? This means that investors or traders are buying a very low amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very low amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Chipotle Mexican Grill’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Chipotle Mexican Grill look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 24.37% | 7.75% | 19.47% | 61.01% |
| Revenue Growth (Y-O-Y) | 13.45% | 17.16% | 18.36% | 20.89% |
| Earnings Reaction | 11.53% | 5.72% | -15.01% | -21.51% |
Chipotle Mexican Grill has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been pleased with Chipotle Mexican Grill’s recent earnings announcements.
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How has Chipotle Mexican Grill stock done relative to its peers, Panera Bread Company (NASDAQ:PNRA), McDonald’s (NYSE:MCD), Jack In The Box (NASDAQ:JACK), and sector?
| Chipotle Mexican Grill | Panera Bread Company | McDonald’s | Jack In The Box | Sector | |
| Year-to-Date Return | 26.93% | 19.96% | 15.13% | 27.62% | 18.34% |
Chipotle Mexican Grill has been a relative performance leader, year-to-date.
Conclusion
Chipotle Mexican Grill provide quick, easy, tasteful, and socially aware food items to consumers worldwide. The stock has seen an excellent run over the last few months and looks like it wants to test all-time high prices. Earnings and revenue figures have been increasing over the last four quarters which has kept investors upbeat. Relative to its peers and sector, Chipotle Mexican Grill has been a year-to-date performance leader. Look for Chipotle Mexican Grill to OUTPERFORM.
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