Some investors may say that Chipotle is overvalued with a price-to-earnings ratio north of 60 and a five-year stock price increase of 550%. But in my view, this stock has plenty of room to run.
With 1,230 units, Chipotle lacks the “every street corner” ubiquity of fellow fast-food giants such as McDonald’s. However, its lack of presence is exactly what makes Chipotle such a promising stock.
Chipotle has room to expand to many untapped markets at home and abroad, and with virtually no debt and solid free cash flow, this company is in a prime state to expand. The company’s 2012 suburban-focused plan to open 155-165 new units demonstrates this. Given that many believe Chipotle’s saturation rate is closer to 3,000 units, this growth and expansion could continue for some time.