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An Interesting Debate About CMG

|Includes: Chipotle Mexican Grill, Inc. (CMG)

There is an interesting debate brewing between myself and others about if Chipotle Mexican Grill (NYSE:CMG) is a stock worth shorting or not. I continue to stress that this is a stock currently trading at 39 times next year's projected earnings. That is despite having an annual growth expectation of only 20% for the next five years. I do not believe that the stock should trade this high if it even was able to make those growth expectations, and I don't think it will even do that. 

As I outlined in my article about Chipotle, I feel that this company does not provide enough of a niche product to justify such a high multiple. At the same time, CMG is now a $10 billion company, and I just do not see them maintaining such a high rate of growth. Yes, Chipotle has enjoyed a 40% growth rate per year for the last five years, but that was when it was a much smaller company. Investors are already pricing in a continued growth story like this for Chipotle for years to come. There is just no reason to buy the stock at these prices when it already has so much built into it as it is. 

I say get short CMG, but we shall see how this turns out and who is right in this debate. I have no disillusions that I could not be wrong, but I do not feel that I am in this case.