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Why Any of This Matters

If you don't write down what you're thinking, you're short-selling yourself on some of your best ideas. That's why this is here.

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Where Is Chipotle Headed?

11/20/2014

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The story:
  • The fast-casual dining market did $34.5 billion in sales in 2013.
  • Chipotle did $3.2 billion in sales in 2013.
  • This implies Chipotle holding 9.2% market share.
  • The fast-casual market is projected to grow to $50 billion in 2018.
  • If Chipotle just maintains its 9.2% share, that gives it $4.6 billion in sales in 2018.
  • The market expects more though. 
  • Expectations are for $7 billion in sales for 2018 implying 14% market share.
  • Maintaining a 10.2% net margin outs net income at about $715 million.
  • The market most likely will not be paying a 50+ earnings multiple for this story by then.
  • Let’s assume Chipotle rings up $7 billion in sales in 2018 and holds net margin at 10.2%.
  • Let’s also assume that share count stays flat. Reasonable given management’s track record. 
  • At 40X earnings the company would have a market cap of $28 billion.
  • With 31 million shares outstanding, that would peg the stock price at around $900.
  • Of course it could be more, it could be less, this is all just rampant speculation and assumption.

The question:
  • So is Chipotle expensive today? Fair? Cheap?
  • Would you buy shares of Chipotle today? Is it a market beater from today’s price?

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    My name is Jason A. Moser and I'm lucky enough to have a job doing what I love to do: investing. But my family, golf, music, watercolors, reading, writing, current events...these are all things that matter to me. Consider yourself warned.

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