August 11, 2008
almost the day that Chipotle (NYSE: CMG, $72.61) was spun-off from McDonald's
(NYSE: MCD), the
company has been a fan favorite in the fast-casual dining
segment. The stock hit the market around $45 per share in
January 2006, and within two years had ascended to the dizzying
height of $155 in a near-parabolic upward move.
But like many highfliers before it, the stock couldn't sustain
that lofty valuation and fell back to Earth once investors realized they had gotten carried away. The gains
evaporated just as quickly as they appeared, and today the
shares are back trading in the upper $60s.
With valuations having cooled off noticeably, this spicy
Mexican food purveyor is once again looking quite palatable
for value investors.
For those that haven't had the opportunity to visit,
Chipotle lies somewhere in between fast-food and casual
dining. Patrons begin lining up at the door and then wait as
their tacos, burritos and salads are prepared before them
assembly-style using fresh ingredients.
other words, these units offer the speed, convenience and
pricing of a fast-food outlet, but the quality and ambience of a
sit-down restaurant -- you won't find cilantro-lime rice and
shredded beef with cumin, cloves and garlic just anywhere.
That rare combination has kept customers piling in even
under these extraordinarily challenging conditions. While most
rivals are struggling to tread water, Chipotle has posted a
sizeable +8.5% gain in same-store sales so far this year and a
+27% bump in both overall revenues and profits.
Nevertheless, with comps having grown at a torrid double-digit
pace for more than a decade, investors have reacted harshly to
signs of deceleration. Rising costs for things like cheese and
guacamole have also become a concern.
Still, the company's ability to navigate this tough climate is
impressive and bodes well for a time when consumers begin eating
out more -- and rest assured that time will come. Plus, the
Chipotle concept is still catching on around the country. In
fact, management is planning to add as many as 140 new locations
this year and deliver healthy +25% annual earnings growth for
years to come.
About Half-Priced Stocks
mission of Half-Priced Stocks is to help readers identify securities that
are trading at steep discounts to their intrinsic net worth. In some cases
this discount can reach up to 50% or more, giving savvy value investors the
chance to purchase quality stocks for just pennies on the dollar. (Learn
About Nathan Slaughter
Nathan Slaughter has developed a long and successful track
record over the years by investing primarily in deeply discounted securities. He
uses advanced discounted cash flow techniques, along with a host of fundamental
research, to uncover quality stocks that are trading well below their actual
Nathan's previous experience includes a long tenure at
AXA/Equitable Advisors, where he provided comprehensive investment advisory
services to small businesses and high net-worth clients. He also honed his
research skills at Morgan Keegan, where he performed asset allocation,
retirement planning, and consultative portfolio management services.
Several years ago Nathan switched gears and decided to devote
his time exclusively to financial analysis and writing. He has since published
hundreds of articles for a variety of prominent online and print publications,
and he now writes exclusively for StreetAuthority.com.
Nathan's educational background includes NASD series 6, 7, 63,
& 65 certifications, as well as a degree in Finance/Investment Management.
He currently resides in Shreveport, LA with wife Julie and sons Aidan and Riley.
To learn more about Nathan Slaughter's premium value investing newsletter -- Half-Priced
Stocks -- please visit