IBD’s Retail-Restaurants Industry Group: Chipotle (CMG) is the Star

As someone who has long wanted to pull the trigger on Chipotle Mexican Grill, but hesitated to do so, I read the following Motley Fool article with interest. Though it featured Buffalo Wild Wings, I thought I would place some of the higher growth eatery names side by side to see where the growth really is. I selected Dunkin’ Doughnuts, Buffalo Wild Wings, Panera Bread, and Chipotle Mexican Grill (tickers: BWLD, DNKN, BWLD, PNRA, CMG).

As the article states,

“Buffalo Wild is part of IBD’s Retail-Restaurants industry group, which also includes eateries such as Chipotle Mexican Grill (CMG), Panera Bread (PNRA), Dunkin’ Brands (DNKN) and McDonald’s (MCD). The group is ranked No. 18 of the 197 groups that IBD tracks.”

I was a little bit shocked at the results of the side-by-side line up. I was sure that Chipotle would have the most growth going forward, as I’d never really looked at Panera before. However, I was wrong. All of them are bit rich on a PE basis, but that is because of the powerful growth in all four chains.

Stock PE Price/Sales Div Yield (Trailing Annual) Volatility
CMG 54.44 5.4 N/A 0.37
PNRA 25.75 2.1 N/A 0.25
DNKN 36.93 7.3 1.6% 0.2
BWLD 41.79 2.3 N/A 0.33

Looking at the actual EPS results over the past few years shows some erratic behavior in the EPS for a few of the companies, but sales don’t lie and all of the companies have strong sales growth, with BWLD and CMG leading the pack. This surprised me, likely due to the fact that I don’t particularly like wings and love Chipotle’s food.

Stock EPS Qtr. On Qtr. Growth Rev Qtr. On Qtr. Growth
CMG 17.2%   10/2013
10.2%   7/2013
24.4%   4/2013
7.7%   1/2013
18%   10/2013
18.2%   7/2013
13.4%   4/2013
17.2%   1/2013
PNRA 19.4%   10/2013
16%   7/2013
17.1%   4/2013
33.6%   2/2013
8.1%   10/2013
11%   7/2013
12.7%   4/2013
15.3%   2/2013
DNKN 42.3%   10/2013
153.3%   7/2013
4.8%   4/2013
N/A   1/2013
8.5%   10/2013
5.9%   7/2013
6.2%   4/2013
-4%   1/2013
BWLD 66.7%   10/2013
41.9%   7/2013
-11.2%   4/2013
21.2%   2/2013
27.9%   10/2013
27.8%   7/2013
21.2%   4/2013
37.8%   2/2013

 

However, it is future growth that Wall Street really loves. Looking ahead two quarters it is a tie between BWLD and CMG, though I’d give a slight edge to CMG. However, CMG trades at a significantly higher premium.

 

Stock Current Qtr
EPS Growth
Forecast
Next Qtr
EPS Growth
Forecast
Current Qtr
Rev Growth
Forecast
Next Qtr
Rev Growth
Forecast
CMG 39.1% ( High )
29.4% ( Ave. )
24.2% ( Low )
26.1% ( High )
14.3% ( Ave. )
4.9% ( Low )
19.1% ( High )
18.1% ( Ave. )
16.8% ( Low )
20.5% ( High )
16.7% ( Ave. )
10.2% ( Low )
PNRA 12.3% ( High )
10.6% ( Ave. )
8.9% ( Low )
12.2% ( High )
4.9% ( Ave. )
-1.8% ( Low )
17.6% ( High )
16% ( Ave. )
9.2% ( Low )
13% ( High )
10% ( Ave. )
8.4% ( Low )
DNKN 32% ( High )
25.7% ( Ave. )
6.9% ( Low )
77.3% ( High )
63.6% ( Ave. )
54.5% ( Low )
16% ( High )
10.6% ( Ave. )
3.5% ( Low )
8.2% ( High )
5.8% ( Ave. )
-4.4% ( Low )
BWLD 35.4% ( High )
19.6% ( Ave. )
11.7% ( Low )
70.1% ( High )
47.1% ( Ave. )
32.2% ( Low )
20.4% ( High )
13.8% ( Ave. )
12.1% ( Low )
24.1% ( High )
20.5% ( Ave. )
18.3% ( Low )

 

I’ve included the quarter over quarter charts to illustrate just how strong these two companies have performed and are expected to perform.

Source: QoQ Charts
 

Source: QoQ Charts
 

 

Conclusion

These are two very richly priced stocks, but the price is justified. They are growing and growing fast. I would be a bit cautionary on CMG’s second quarter, as it looks like there is the possibility of weakness.

All of the stocks in this group have their selling point. Technically speaking both have run hard after earnings. I’d say to wait for a pull back, but I’m not sure you’ll get one with the market running as it is right now.