Chipotle Mexican Grill, Inc. (CMG): 3 Images That Will Shock You

Chipotle is the most expensive in the casual restaurant space trading at nearly 30 times next year’s earnings. With a high-teen earnings growth rate the stock trades at a whopping 1.7 PEG ratio.

What’s puzzling is that I can find so many better stories in the industry that are trading a cheaper valuations.

Take Starbucks Corporation (NASDAQ:SBUX), for example. The company has lots of growth runway in China, Latin America, and India. Starbucks is growing comps at an impressive mid-single digit pace through the introduction of new food and beverages. In addition the company’s margins are expanding with falling coffee prices and greater economies of scale.

Of course, Starbucks isn’t inexpensive at 22 times forward earnings. However, the company is growing earnings at a 20% clip, the same rate as Chipotle. This makes Starbucks’ multiple look downright cheap by comparison.

With Chipotle’s same-store sales growing in the low single digits it starts to resemble Dunkin’ Brands or Panera Bread Co (NASDAQ:PNRA). But both of those stocks can be bought at lower multiples of 21 and 20 times forward earnings, respectively.

Why am I paying a premium for Chipotle exactly?

Foolish bottom line

Despite these concerns I haven’t completely backed away from Chipotle for two reasons. First, the past year’s poor results gives the company easy comps to beat this year. Second, Chipotle Mexican Grill, Inc. (NYSE:CMG) has lots of growth ahead. With less than 1,500 locations, the company has room to double its locations in the North America with international markets remaining almost completely untapped.

But I have to admit, there are a lot of holes in my thesis.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill and Starbucks.