Shares of Chipotle Mexican Grill (CMG) have taken investors on an amazing ride. Offered as an IPO for a mere $22 in 2006, Chipotle stock is now trading at nearly $730. CMG is up more than 390% in the last five years and is up about 80% in the last two years. 
So far this year, Chipotle stock has gained an impressive 6.5% — even as the Dow Jones Industrial Average is showing a loss. The gains, in fact, have some bearish analysts saying that Chipotle’s valuation makes the stock too expensive. And some are pointing to the company’s most recent earnings report, which shows that same store sales came in lower than analysts’ expectations.
And of course, Chipotle has tons of competition in the restaurant industry.
But regardless of what the skeptics have to say, I have three reasons why investors should be buying Chipotle stock today — as opposed to chasing another new fast casual concept.
Chipotle Stock: ShopHouse and Pizzeria Locale
While the burrito-slinging side of Chipotle is rocking, what investors thinking about buying CMG stock today should be excited about is the ShopHouse and Pizzeria Locale concepts. At the end of the most recent quarter CMG operated 1,847 Chipotle locations, 10 ShopHouse restaurants and two Pizzeria Locale spots.
The ShopHouse idea is fast, casual Asian-inspired cuisine. The company started this a few years ago and has taken growth slowly and methodically. Chipotle has obviously perfected the art of making Mexican fast casual food well, so trying its hand at Asian food seems like a logical move.
Fast casual Italian food may be more difficult for the Pizzeria Locale concept, but with a lack of truly good national pizza chains to choose from, CMG doesn’t have a make the best pizza in the world. It just has to be better than the competition — and that shouldn’t be too difficult.
My biggest concern with Pizzeria Locale is how it would change Chipotle’s model. Chipotle’s customers order food and watch it prepared in front of them — a format that also works well for the ShopHouse idea. But for pizza that model is more difficult to implement — and most Americans are conditioned to having pizza delivered to their door.
Chipotle Stock: ‘Healthier’ Eating
Although most would agree a burrito is not really a healthy meal, the fact remains Chipotle’s food is healthier than most options at the fast-food burger joints. Not only are the calorie and fat levels for the most part lower with Chipotle’s food, but the quality of Chipotle’s food is healthier than other fast food.
That’s not to say that you can’t get high-calorie meals at Chipotle. Based on Chipotle’s own website a steak burrito with some standard toppings and a side of chips and guacamole is more 2,000 calories, and that tops McDonald’s (MCD) Big Mac and medium fries.
Regardless though, Chipotle is riding that wave of healthy eating and has built its reputation as the company offering the healthy food. As long as the healthy living trend continues, the business should benefit.
Chipotle Stock: Reasonable Price-to-Earnings Ratio
Currently trading at a price-to-earnings ratio of 45 and a forward P/E of 35, Chipotle stock has what most investors would call a steep valuation. But considering how CMG has performed over the past few years with just its Mexican concept, a P/E ratio of 45 may be considered a steal in the future if the ShopHouse concept and Pizzeria Locale idea begin to gain traction.
That would mean Chipotle could have not one, but three massive brands. This would allow the company to essentially have triple the locations that it could have with just one brand, while not completely cannibalizing its own business. If Chipotle can post revenue of $1.2 billion in three months and earnings per share of $4.55 with just one brand, imagine what it can do with three brands that are performing well.
The Bottom Line
There are many options for investors who want a piece of the food and beverage industry in their portfolio, and as things stand today, Chipotle stock is one of the best options available. Unlike the competition, Chipotle offers both safety in the fact that the chain already has a hold on a large portion of the country and still massive growth potential with ShopHouse and pizza chains.
Although they will likely have to deal with a bumpy road, long-term investors buying shares of Chipotle stock today with the mindset of holding them for years to come will certainly be rewarded.
As of this writing, Matt Thalman did not hold positions in any company mentioned above. Follow him on Twitter at @mthalman5513.
