Chipotle Mexican Grill's (NYSE:CMG) stock continues to defy gravity as it is now up over 50% over the past year to new highs of just under $400 a share. CMG is leaving other stocks in the dust and investors baffled. The relative trailing valuation metrics, analysts, and publically traded comps suggest that Chipotle's stock is way overvalued. If you look at some of the ratios, they are incredibly high.
For example, the stock's current P/B ratio is 11.8 and trailing P/E ratio is 58. The market is suggesting that Chipotle will grow at very high rates for a long time. This is certainly a possibility, but highly unlikely that Chipotle will be the exception to the rule. Below is a closer look at the valuation metrics and chart.
Valuation: Chipotle's trailing 5 year valuation metrics suggest that the stock is overvalued as all of the metrics are above their respective 5 year averages. Chipotle's current P/B ratio is 11.8 and it has averaged 6.2 over the past 5 years with a high of 10.2 and low of 2.9. Chipotle's current P/S ratio is 5.4 and it has averaged 3 over the past 5 years with a high of 4.7 and low of 1.4. Chipotle's current P/E ratio is 58.1 and it has averaged 39.2 over the past 5 years with a high of 69.1 and low of 22.3.
Price Target: The consensus price target for the analysts who follow Chipotle is $383. That is downside of -3% from today's stock price of $392.98 and suggests that the stock is overvalued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: Chipotle is currently trading at about $393 a share with analysts expecting EPS of $10.84 next year, an earnings increase of 25% y/y, for a forward P/E ratio of 36.3. Taking a look at the company's publically traded comparisons will give us a better idea of the stock's relative valuation. Tim Hortons (THI) is currently trading at about $53 a share with analysts expecting EPS of $3.1 next year, an earnings increase of 12% y/y, for a forward P/E ratio of 17.2.
Yum! Brands (NYSE:YUM) is currently trading at about $66 a share with analysts expecting EPS of $3.75 next year, an earnings increase of 15% y/y, for a forward P/E ratio of 17.7. Panera Bread (NASDAQ:PNRA) is currently trading at about $156 a share with analysts expecting EPS of $6.62 next year, an earnings increase of 18% y/y, for a forward P/E ratio of 23.5. The mean forward P/E of Chipotle's competitors is 19.5 which suggests that Chipotle is overvalued relative to its publically traded competitors.
Earnings Estimates: Chipotle has beat EPS estimates 2 times in the past 4 quarters. The company's EPS figures have come in between -4 cents and 5 cents from consensus estimates or about -2.4% to 2.7% from analyst estimates. The company's earnings come been relatively close to consensus estimates which suggests that analysts are good at projecting the company's results and share upside from earnings surprises will be limited.
Price Action: Chipotle is up 59.8% over the past year, outperforming the S&P 500, which is up 5.4%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $364.54 and above its 200 day moving average, which sits at $325.05.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.