Chipotle Mexican Grill (NYSE:CMG) continued its blistering growth, as fourth quarter net income grew 47% on the strength of a 12.6% increase in same-store sales. The company said that despite rising input costs, it plans to hold the line on prices this year. The market sent the stock up more than 5% on the report.

IN PICTURES: 9 Ways To Trim The Fat From Your Spending

Growth Story Continues
Chipotle's excellent management continues to grow its earnings even faster than its fast-growing revenue, as it increases traffic and expands its number of restaurants. Chipotle pushed its operating margins up 140 basis points to 25.9% in the year-over-year quarter, and 180 basis points to 26.7% for the full year 2010 versus 2009. Although the company expects inflation for its beef and chicken ingredients to rise into the mid-single digits in 2011, it doesn't plan on initially passing these costs through to the consumer.

Burger Alternatives
There are a slew of chains along with Chipotle which operate beyond the burger model. Specialty sandwich restaurant Panera Bread (Nasdaq:PNRA) also turned in great fourth quarter earnings, with net income up 21.7%, revenue up 16.7% and same store sales up 5.2%. BJ's Restaurants (Nasdaq:BJRI) quadrupled its earnings, while Cheesecake Factory (Nasdaq:CAKE), though profitable, was hampered by poor weather. California Pizza Kitchen (Nasdaq:CPKI) also turned profitable after a loss in last year's same quarter.

As for Chipotle, one could argue Yum! Brands (NYSE:YUM) with Taco Bell paved the way for the wide cultural acceptance of burritos, a slipstream which Chipotle is riding to maximum advantage for its stunning success.

Turning Burritos into Cash
Chipotle's fourth quarter revenue rose 24.5%, and net income was $46.4 million or $1.47 per share, versus $31.6 million net income or 99 cents a share in the year ago quarter. Chipotle opened 62 new restaurants, with company plans to open 135-145 new restaurants in 2011. For the full year 2010, net income rose to $178.98 million or $5.64 a share, compared to $126.84 million or $3.95 a share, on revenue of $1.836 billion, up from $1.518 billion in 2009. Same store sales for the year increased 9%. These numbers read like a baseball superstar's stats - they're all great.

Chipotle's Prospects
There are a couple of other numbers to watch, however. The first will be food input costs. This was 31% of revenue in the fourth quarter, a slight rise from 30.1% in the previous year's quarter. Food inflation may end up making a larger impact on Chipotle than the company assumes.

Another number to watch is Chipotle's share price, which touched its 52-week high of $275. Investors might also want to look at the PE. Chipotle trades at a current PE just under 50 and a forward PE of 33, so investors are paying up for that impressive growth. Chipotle's a fast-food superstar right now, but the stiff premium in its stock price leaves an increasingly smaller margin of safety. (To learn more, see Sinking Your Teeth Into Restaurant Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  2. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  3. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  5. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  6. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  7. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  8. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  9. Investing Basics

    What to Cut From Your Portfolio Right Now

    Owning stocks may shortly become too scary for your portfolio. Here's why, and here are some alternatives.
  10. Personal Finance

    Careers: Equity Research Vs. Investment Banking

    Equity research is sometimes viewed as the unglamorous, lower-paid cousin to investment banking. In this article, we compare the two careers.
RELATED TERMS
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  4. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  5. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  6. Impact investing

RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!