Chipotle Mexican Grill's (NYSE:CMG) earnings growth rate lags the 31% CAGR delivered to shareholders
Chipotle Mexican Grill, Inc. (NYSE:CMG) shareholders have seen the share price descend 12% over the month. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 286% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
Although Chipotle Mexican Grill has shed US$7.0b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for Chipotle Mexican Grill
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Chipotle Mexican Grill achieved compound earnings per share (EPS) growth of 45% per year. The EPS growth is more impressive than the yearly share price gain of 31% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 61.09, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Chipotle Mexican Grill's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Chipotle Mexican Grill shareholders have received a total shareholder return of 40% over the last year. That gain is better than the annual TSR over five years, which is 31%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Chipotle Mexican Grill that you should be aware of.
Chipotle Mexican Grill is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com