Investors love a good stock split. Those events don’t do anything more than split the same-sized pie into smaller pieces, but they only occur after a company’s share price has soared, which generally indicates that the business is doing quite well. Even better, when management decides to split a company’s stock, it implies that it thinks there’s more growth coming.
Chipotle Mexican Grill (NYSE: CMG) wowed Wall Street back in March with the announcement of a stock split with one of the biggest multiples ever: Each current share will be split into 50 new shares. The change is set to go through on June 25 for shareholders of record as of June 18.
So is now the time to buy Chipotle?
Chipotle stock looks unstoppable
Chipotle has been an incredible stock to own over its time as a public company, and while it has had some rough patches, it has absolutely crushed the S&P 500 over the past five years as well as most other time periods.
CMG Chart
It has created a fast-casual model that generates incredible customer loyalty, sales, and profits — and that has been hard to replicate. It’s known for selling healthy, fresh Mexican-style fare at midlevel prices; it’s more expensive than the typical fast-food chain, but significantly cheaper than the standard sit-down restaurant. It targets a more affluent clientele that tends to be more resilient during periods of economic volatility, and it has demonstrated strong performance over the past few years despite a pandemic and the surge of inflation that followed it. It is also incredibly profitable, with high and increasing margins and net income.
Other chains have attempted to mimic its model and performance, and many new contenders have been touted as “the next Chipotle.” But whatever its secret sauce is, it continues to stand out from its peers. As CEO Brian Niccol recently quipped: “The next Chipotle is Chipotle.”
Consider its operating margins compared with those of Sweetgreen, Shake Shack, and Cava Group.
CMG Operating Margin (Quarterly) Chart
What’s coming next?
Chipotle already has more than 3,000 restaurants, but it’s aiming to…
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