Chipotle Mexican GrillCompany Analysis

James GaffiganZachary Hylton

Jordan SchwartzNicholas Pycha

OverviewFounded:1993, Colorado

Industry: fast casual food

1,300 restaurants globally

Restaurant chains in:◦35 states in U.S◦District of Columbia◦Ontario, Canada◦Europe

(Zack's, 2012)

OverviewServes:

◦Burritos and burrito bowls◦Tacos◦Salads

Food with Integrity Policy◦Fresh Ingredients◦local produce ◦Naturally raised animals

(Zack's, 2012)

Investment Decision

Not a good long-term investment

◦Fierce competition: Taco Bell and Qdoba

◦Overvalued stock price/ lack of dividends

◦Current legal issues

(Mussi, 2012)

Jordan Schwartz

SWOT Analysis◦Chipotle vs. Taco Bell

Sustainable resources◦Food with Integrity vs. Cantina Bell

SWOT Analysis

Strengths◦Sustainable resources: Food with Integrity◦Marketing programs◦Minimal growth

Weaknesses◦Irregularities in work authorization

documents ◦Increased labor costs

(EBSCO, 2012) & DATAMONITOR: Yum! Brands, Inc. (2010, September 2)

SWOT Analysis

Opportunities

◦Focus on expansion

Threats

◦Fierce competition

◦Increasing costs

(EBSCO, 2012)

James Gaffigan

Competitive factorsBusiness in the news

Competitive Factors

Current and potential earningsMergers and acquisitionsAny development of a new productNews

(How the Market Works, 2012)

Business in the News

Rounding price of foodLegal issuesFinancial prospects disclosed incorrectlySubstantial drop in stock price

(Torrisi, 2012) (Olsen, 2012)

Zachary Hylton

Financial Analysis

◦Significant factors

Gross Profit

Net Income

P/E Ratio

Earnings Per Share

(Zack's, 2012)

Gross Profit

Gross Profit (in millions)

0 2,000 4,000 6,000 8,000

QdobaTaco BellChipotle

(Zack's, 2012)

Net Income

Net Income (in millions)

020

040

060

080

0

1,00

0

1,20

0

1,40

0

QdobaTaco BellChipotle

(Zack's, 2012)

(zacks.com)

P/E Ratio

FY Estimates

0 5 10 15 20 25 30 35

QdobaTaco BellChipotle

Earnings per Share

Diluted EPS

0 1 2 3 4 5 6 7 8

QdobaTaco BellChipotle

(Zack's, 2012)

Stock Prices

Sept '08 Sept '09 Sept '10 Sept '11 Sept '120

50

100

150

200

250

300

350

400

ChipotleTaco BellQdoba

(yahoo.finance.com)

DividendsCompany Yield Annual Div. Payout Ratio

Chipotle -0- -0- -0-

Yum Brands 1.93% $1.34 .36

(zacks.com)

Nick Pycha

Analyst's Evaluations

◦Standard and Poor’s

◦Zacks Investment

Conclusion: Our recommendation

Standard & Poor’s

Current recommendation: Hold

Risk assessment: Medium risk

Values CMG stock price at $278.20 per

share

◦Overvalued by $58.20 or 17.3%

(Standard & Poor’s, 2012)

Zacks Investment ResearchZacks Rank: 3- Hold

Recommendation: Neutral

Failed to meet estimations

◦Earnings per share

◦Revenue

(Zack's, 2012)

Conclusions

Fierce competition

Overvalued stock price/ lack of dividends

Current legal issues

Recommendation: YUM Brands