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Chipotle Mexican Grill, Inc. (CMG)’s Exotic Recipe for Growth

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Chipotle Mexican Grill, Inc. (NYSE:CMG) isn’t just rolling burritos these days.

The popular fast-casual chain announced yesterday that it will be doubling the size of its ShopHouse Southeast Asian Kitchen chain. Chipotle opened the first Asian-inspired eatery in Washington, D.C.’s Dupont Circle two years ago. There are three more under construction — one in the nearby Georgetown area and two in California — that should open in a few weeks. Now the company has signed leases for four more locations in the same two markets.

Chipotle Mexican Grill, Inc. (NYSE:CMG)

For now, this isn’t going to move the needle. We’re talking about eight locations that will be open by the middle of next year. The namesake haven of fast-casual Mexican cuisine will top 1,500 locations later this year.

However, it never hurts to have a second concept ready to go once growth starts to decelerate.

Chipotle Mexican Grill, Inc. (NYSE:CMG) is expected to grow revenue at a 16% clip this year and yet again in 2014. That’s impressive, but it’s already well off the company’s heady pace of the past. Revenue climbed 20% last year after coming through with a 24% boost a year earlier.

Investors have also come to expect big growth spurts out of Chipotle Mexican Grill, Inc. (NYSE:CMG). The stock fetches 34 times this year’s projected earnings, even though it’s growing its top line at half that pace these days.

Chipotle doesn’t necessarily command the highest P/E among Mexican restaurant operators. This is a surprisingly spicy niche in terms of valuations. The much smaller Chuy’s Holdings Inc (NASDAQ:CHUY) is trading at nearly 50 times this year’s profit target, and it’s only growing at a slightly faster rate than Chipotle Mexican Grill, Inc. (NYSE:CMG). Taco Bell parent Yum! Brands, Inc. (NYSE:YUM) may seem like a relative bargain at just 23 times earnings, but where’s the growth? Analysts see Yum! Brands posting slight dips in revenue and earnings this year as its once-hot KFC struggles in China.

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