InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

Collect this extra money immediately!

Collect this extra money immediately!This unique income-boosting opportunity allows you to collect up to $1,003 a month in extra government cash. This plan is available to everyone over the age of 18. And because of the way the government views the money that comes from it, your current—or future—Social Security benefits won’t be affected. There’s still time to get your name on the next check run. I’ll show you how here.

 

Fine Dining

By Thomas Scarlett on August 27, 2015

While the financial markets continue to gyrate wildly, there was some good news on a broader economic front this morning. The U.S government revised its estimate of economic growth in the second quarter of 2015 to an annualized rate of 3.7 percent. That’s more than a full percentage point higher than the initial reading of 2.3 percent reported by the Commerce Department in late July.

So economic activity is happening out in the heartland. Some of that money is going for discretionary purchases: leisure activities, nicer clothing and eating out.

Dining out is about as discretionary a purchase as you’ll find. When consumers are feeling confident, you’ll find them crowding into restaurants. When they’re not, home-cooked dinners and brown-bag lunches are the order of the day.

The last recession was no exception: faced with surging unemployment, a crumbling real-estate market and plunging stock prices, many people quickly decided that restaurant meals no longer fit into their budgets.

The sluggish recovery initially did little to help lure diners back: over the five years leading up to 2014, sales climbed an average of just 1.5% annually. At the same time, consumer tastes have changed quickly, particularly when it comes to healthier and locally sourced food.

Now there are signs the lean times may be fading. IBISWorld, for example, estimates that restaurant revenue rose 4.5% in 2014, to $98 billion—well above pre-recession highs.

The National Restaurant Association recently released its latest restaurant performance index (RPI) reading, and the trend continues to point upward.

Chipotle Mexican Grill (NYSE: CMG) is one company with very promising fundamentals.

Chipotle offers high-quality food that’s both speedily prepared and swiftly served, and the restaurant uses top-notch ingredients. You do that on a regular basis, and it’s no wonder your revenues grow 18% annually and you have opened 1,500 restaurants across the U.S.

According to a just-released earnings report, some highlights for the second quarter of 2015 as compared to the second quarter of 2014 include: revenue increased 14.1% to $1.2 billion; comparable restaurant sales increased 4.3%; restaurant-level operating margin was 28.0%, an increase of 70 basis points; net income was $140.2 million , an increase of 27.1%; earnings per share were $4.45 , an increase of 27.1%; and the chain opened 48 new restaurants.

The company follows its “food with integrity” mantra, which involves emphasizing organically grown produce and naturally raised beef. That helps it stand out from other chains, but it also means higher ingredient costs (33.6% of revenue in the latest quarter).

“We feel good about our second quarter results, as our revenue, average restaurant sales, and comparable restaurant sales have continued to grow even comparing to a very strong 2014. The strength of our business is the product of our unique food culture and unique people culture, and we constantly find ways to improve. Our relentless focus on the key drivers of our business allows us to continue to change the way people think about and eat fast food,” said Steve Ells, the company’s chairman.

Chipotle continues to add to its offerings: it partnered with two restaurateurs to launch Pizzeria Locale, a pizza outlet in Denver that also uses all-natural ingredients. It may open two more. The company also recently began offering catering.

Of course, there are many other restaurant chains out there competing for consumers’ dollars. However, this company’s focus on all-natural foods and expansion (it plans to open about 120 outlets this year) put it in a great position to grab market share as restaurant sales rise.

The company’s price earnings ratio is around 44, which may seem a tad high. But when compared to forward earnings, the ratio is more like 32. The recent volatility in the stock price has created a buying opportunity for new investors, especially considering how expensive each individual share is.

We think Chipotle Mexican Grill rates a buy up to 745.

Tom Scarlett is an analyst with Investing Daily and Personal Finance.

You might also enjoy…

 

Obscure Tax Law Forces This Company to Pay Out 90% of its Profits

A 50-year-old loophole is forcing one company to pay out $9 of every $10 it makes from ironclad contracts with the U.S. Government.

In fact, over the past seven years, it’s made payments ranging from a few dollars… to tens of thousands of dollars… 30 times. Without a single cut! 

Most folks don’t even know this company exists, but the ones that do are making a mint.

Like Ted B., who’s set to receive a check for $1,096 just a few days from now.

Merrill H., a 58-year-old from New York, has collected over $3,385 so far. 

And retirees Beth and Terry P. have raked in $16,555.

I’ve put together a special report that will give you all the details, including simple instructions on how to get your name on the payout list before the next cutoff date.

You can get your copy here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.