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What Can Investors Expect from Chipotle Mexican Grill, Inc. (CMG)?

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Just twelve short months ago, Chipotle Mexican Grill, Inc. (NYSE:CMG) was widely considered to be the “Amazon” of the fast-casual world—a highflying, momentum-driven stock that ignored the sentiments of most value investors. After surpassing the $350 mark in early January of 2012, shares of Chipotle rose as high as $442.40 in anticipation of that year’s first quarter earnings report.

Chipotle Mexican Grill, Inc. (NYSE:CMG)

In late July, when the company reported second quarter revenue growth that was a bit lighter than expected, the markets reacted swiftly, shaving off more than 20% of Chipotle’s value over the period of one trading day. Pre-selloff, the stock traded at a premium even its mother couldn’t love—a P/E (54x) more than double that of its industry’s average (21x) and a PEG multiple near 1.8. Remember these figures, we’ll go back to them.

By the end of the next quarter (see our full coverage of the situation), investors’ sentiment toward the stock actually turned sourer, as Chipotle’s miss grew a bit wider. Despite notching Q3 EPS growth of 20% year over year, the company still missed the Street’s earnings estimates by two cents on the back of a sub-par top line yet again. While Chipotle did open 36 new locations in the period, higher operating costs across the board were also to blame for the woes.

Now, over the past month, CMG shares have actually risen 6.7%, an appreciation that has softened the losses of hedge fund backers like Patrick McCormack’s Tiger Consumer Management, Philippe Laffont’s Coatue Management, Jim Simons’s Renaissance Technologies (see all of Jim Simons’s favorite stock picks here) and Steven Cohen’s SAC Capital. Here’s a full list at the smart money’s interest in Chipotle, but it’s worth mentioning that even at the end of the third quarter, there were still some high-profile investors bullish on the company’s prospects.

The obvious question that remains is: what are reasonable expectations for investors staring Chipotle in the face at the moment?

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