New Stock Revealed – Chipotle Mexican Grill (CMG)

cmg logo

cmg taco



Omg.  I am writing this post at 1am and I feel hungry just looking at the pictures.  If anybody knows any good mexican restaurants in Singapore please let me know in the comments below!


In case you are a new reader to the blog, we have a tradition here.  When we purchase a new stock, we will usually release a teaser post for everyone to guess the stock before we come up with a second post that reveals the stock.   Here at the Bf Gf Money Blog, we try to keep our articles light-hearted.


Yes so I bought Chipotle Mexican Grill on 23 April at a price of $636.50. 


They had just released Q-on-Q earnings that showed earnings increase of 47% but the stock had dropped by about 8% as same-store-sales (SSS) growth has declined to 10%.


In comparison, McDonald’s SSS growth for the same quarter in US was -2.6%.


So CMG’s SSS statistic is not too bad in comparison right?


As mentioned, the stock has been trading around a PE range of 46-49, and I had made up my mind to buy it if it drops to 42 and below.  I decided on this price point based on historical PE levels.


Chipotle Mexican Grill PE Ratio  TTM   CMG

If you wish to buy at the lowest PE of 27 -35, you have to pray for a big correction.  PE 41 is in the price-range of fair-overvalued for me, so I have dumped in a small-sized bet.  If a correction comes and the PE falls to 30, I will consider picking up more shares.  But for now, as I do not wish to miss out on growth, a small bet would suffice.


I have never eaten at CMG before but friends who have done so always tell me how awesome it is.  I believe them, because CMG’s financial statements are SO BEAUTIFUL.  (I never thought I would use the adjective ‘beautiful’ to describe financial statements.)  Take a look and see what I mean….


Income Statement for Chipotle Mexican Grill Inc Class A  CMG  from



Cash Flow for Chipotle Mexican Grill Inc Class A  CMG  from

Diluted EPS growth and FCF growth is about 25% annulised.  There is also no debt.  Expansion of restaurants are funded by cash generated from existing businesses.  This stock has been almost a 10 bagger since 2007, and there doesn’t seem to be any change in fundamentals.  They are still plowing on, expanding, experimenting.  (By the way, I have never seen any SGX companies with this kind of financial statements…now you know why I made the switch to US stocks!)


Culture of CMG

To understand the success of CMG, we must look beyond numbers.  Their uniting vision and mission is to CULTIVATE A BETTER WORLD.  Their CEO, Steve Ells, lives and breathes this mission.  He stringently makes sure that all CMG’s ingredients are purely organic and up to his standard.  Recently, pork was removed from their menu as one of their suppliers did not meet the mark.  At first I was worried about the lack of pork in the menu, but after a discussion with a friend, I started to understand what the management was doing.  This kind of drastic and strict moves sends a message across to other suppliers that CMG is not afraid to sack them; and reassures the customers that the company cares deeply about the quality of the ingredients.


CMG also operates on the model of conscious capitalism.  Unlike most companies that try to pay their staff and suppliers less to keep costs low, CMG pays their suppliers and staff above market rate.  By doing so, they form strong partnerships with suppliers and build loyalty in their staff, who are then expected to put in their best at work.  The higher costs are transferred to the customers, who are gladly paying a higher price for the quality of the food.


Hmmm… maybe that’s why the market is paying a premium for its shares as well….HAHAHA! Sorry, random thought.


CMG functions and brands itself as the anti-thesis of the corporate McDonalds.  Funny thing is, CMG used to be under McDonalds as management needed to raise money for rapid expansion at the start.  But after disagreements over issues like serving of breakfast menus, pricing, design, etc, both parties decided they cannot integrate culturally and they broke up.  CMG IPOed in 2006 and cash has been rolling in fast and furious ever since.



steve ells chipotle


CMG is founded by Steve Ells, an Arts graduate who enrolled in a culinary school after graduation.  His original plan was to start CMG, streamline operations, then use the money generated from CMG to open a high-class restaurant.  However, after he opened one CMG restaurant, he found the  response so overwhelming that he had to open another… and another… then another…CMG now has about 1800 restaurants.  They do not franchise as they are obsessed with food quality control.


To get a deeper insight of CMG’s management and culture, take a look at their history in the link below:


Chipotle: A Definitive Oral History


It is a wonderful story of an entrepreneur who stumbled upon a hit, proceeded to work hard on it and use CMG’s success as a vehicle to change the world.  If you are planning to invest in CMG, do look at the link posted above!!  It is a great case study of how a company’s culture and management actually has a direct effect on the amazing financials that you saw earlier.



What does the Future hold for CMG?

Time and time again, Steve Ells will reiterate his focus on using the best ingredients to serve the best food to customers.  They have recently removed GMO from their ingredients as it doesn’t align with their vision.  This again, reaffirms and continues to strengthen their branding.


They have also just started food delivery services through a company called Postmates.  They actually tried delivery before but decided to stop it as the delivery does not meet standards.


They will continue opening more restaurants.  McDonald has about 14,000 restaurants in US compared to CMG’s 1,800.  This shows that CMG still has runway left for growth.


They are experimenting with Asian food with a restaurant called ShopHouse.  They are also experimenting with pizzas with a restaurant called Pizzeria Locale.  These restaurants are still not contributing much to revenue but it’s good to see that they are diversifying.  They haven’t expanded much overseas, with only 17 outlets abroad with the majority in the UK and Canada.


I thought that their strict adherence to quality might hinder growth, but then I realise that it is a trade-off for strong branding.  A bigger worry would be if CMG forsakes its food quality for faster growth.


So even though it is already a 10 bagger, CMG still has a lot of room for growth.  (International expansion, delivery, other restaurants…)


I also feel their Marketing Director deserves much credit for marketing campaigns that resonates well with millennials, who happen to be their main customers.

chipotle ad

I will be monitoring this stock every now and then to see if the market will present more opportunities for me to buy more of it.

In the meantime, check out their powerful marketing video with Fiona Apple on vocals!


Hope you found this article useful 🙂

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  1. Jes

    Hi Bf Gf,

    CMG is really nice as they use fresh ingredients and just one burrito can make me full with their well contained goodness! For me, I think Holland V’s Cha Cha Cha is good enough and not too pricey.

    Anyway, I think CMG still have potential to grow as it is healthier than normal fast food. Good buy!

    1. The Bf (Post author)

      Holland V – Cha Cha Cha.

      Thanks for the recommendation Jes. Will definitely check it out!

      1. GMGH

        Hey Bf Gf,

        I gotta second Jes here, Cha Cha Cha is my go to place for Mexican food!

        Maybe I’m a bit more Tex-mex, but the chimichangas (basically, deep fried burritos) are absolutely awesome!

        I recently read an article about CMG removing GMO foods from their ingredients. It seems like a good move for their branding.

        I’m a bit skeptical about their growth overseas though. Mexican food has struggled to establish a foothold in the palates of many cultures, instead only managing to survive through restaurants that are more upscale. Even in the food paradise of Singapore, Mexican food is still considered “fringe”, but it is improving.

        Interesting choice!

        1. The Bf (Post author)

          Wah! Another recommendation for Cha Cha Cha! Guess that’s where I will be feasting this weekend!

          Even if growth overseas doesn’t work, there’s still a lot of room to grow in the US. Also, their experimentation with ShopHouse (asian concept) and Pizzeria Locale provides diversification. It may not work out, but it shows that management is trying.

          I would be more worried if the company doesn’t try anything new and choose to rest on its laurels and past success instead. I like to see a company constantly pushing, defending and expanding their moat. Management must always be paranoid that someone may come to take their ‘lunch’ away.


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