Is Chipotle Mexican Grill, Inc. (CMG) a Buy After Earnings?

Starbucks and Panera are trading at a considerable premium to those two peers, but at a discount to Chipotle Mexican Grill, Inc. (NYSE:CMG) with trailing P/Es around 31. There has been strong growth at Starbucks and Panera: Starbucks, despite its large size, managed double-digit growth rates in both revenue and earnings in its most recent quarter compared to the same period in the previous year while Panera reported 34% higher net income (with high sales growth as well). As a result these peers- Panera in particular- appear to be experiencing similar growth rates to Chipotle (particularly if we focus on that company’s revenue numbers, following the logic that in the long term increasing net margins are unsustainable particularly if sales growth primarily comes from adding marginal locations) and are valued at lower earnings multiples.

We’d conclude that even with Chipotle Mexican Grill, Inc. (NYSE:CMG)’s good quarter Panera or Starbucks- while certainly not cheap- might be better prospects for a growth portfolio. McDonalds and Yum, the other two restaurants we looked at here, carry lower P/Es but are struggling to the point that we would avoid them at this time.

Disclosure: I own no shares of any stocks mentioned in this article.