Chipotle Mexican Grill, Inc. (CMG), Panera Bread Co (PNRA): Are These Fast-Casual Restaurants a Buy?

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Americans are becoming increasingly aware of the health issues facing the country and the need for a healthy lifestyle.  At the same time, we are constantly on the move and require the convenience of fast-food dining. While fast food is synonymous with burgers and fries, and the antithesis of healthy dining, fast- casual restaurants have burst on the scene. These restaurants offer a higher quality, healthier product at a similarly reasonable price. We look at two fast-casual restaurants that have been very successful to determine if they are still great investments at current price points.

Chipotle Mexican Grill, Inc. (NYSE:CMG)

Quick Mexican dining

Chipotle Mexican Grill, Inc. (NYSE:CMG) exploded onto the fast-casual dining scene 20 years ago, and now operates 1,450 restaurants around the country with 12 stores in Canada and Europe. The company offers a relatively simple menu of burritos, burrito bowls, tacos, and salads. Customers have a choice of four proteins and various accompaniments served fresh in an assembly line fashion. The company also makes a strong effort to find quality and sustainable ingredients, sourcing produce from local farmers and buying meat and dairy from livestock raised in a responsible way.

Chipotle Mexican Grill, Inc. (NYSE:CMG) saw impressive growth in 2012 as the company opened 190 new restaurants. Revenue increased by more than 20% from the prior year and comparable-restaurant sales growth was 7.1%.  Chipotle Mexican Grill, Inc. (NYSE:CMG) plans to open between 165 and 180 new restaurants in 2013.

A chain alternative to the local deli

Panera Bread Co (NASDAQ:PNRA) is another fast-casual dining option that has grown quickly.  Panera currently operates or franchises 1,652 bakery-cafes in the United States and Canada. It offers a variety of fresh baked goods as well as sandwiches, salads, and soups. Panera bakes all of its own brands and offers a variety of healthy dining options. The company even has a secret menu that offers diners the healthiest of options if they know to ask for them.

Panera Bread Co (NASDAQ:PNRA) also demonstrated impressive growth with 2012 EPS growth of 27% versus the prior year on comparable bakery-cafe sales growth of 6.5%.  Panera Bread Co (NASDAQ:PNRA) opened 123 new bakery-cafes during the year; a record number of new openings for the company.

Pricing in the Growth

Chipotle Mexican Grill, Inc. (NYSE:CMG) and Panera Bread Co (NASDAQ:PNRA) have enjoyed very strong growth over the past few years, and their current P/E ratios reflect that growth. Chipotle Mexican Grill, Inc. (NYSE:CMG) trades at a trailing P/E of nearly 39.5 while Panera Bread Co (NASDAQ:PNRA) is at about 30.8. Looking forward, Panera Bread Co (NASDAQ:PNRA) is trading at 23.1 times 2014 earnings and Chipotle Mexican Grill, Inc. (NYSE:CMG) is at 28.5 times.

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