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Chipotle has better weightage than Shake Shack

Chipotle Mexican Grill (CMG) has hardly failed its customers with regards to great wholesome food. While the company is committed to continue serving great dishes, can it bring out the same fullness in the investors? Let’s see

In the recently completed first quarter, Chipotle’s revenue increased 7.4% driven by new restaurant openings and an increase in comparable restaurant sales. Comparable restaurant sales rose 2.2% helped by a rise in average check, including a 4.9% benefit from menu price increases.

Chipotle Mexican Grill Store front
Picture Courtesy: Flickr.com

Food costs were 32.4% of revenue, down 140 basis points from last year, due to menu price increases, and lower paper cost and usage. In 2018, Chipotle expects relatively stable prices across most items, resulting in food cost at or below the 33% range.

Occupancy costs remained flat with last year at 7.4% of sales and the company predicts full-year to be in a similar range. Labor costs increased 90 basis points due to deleverage from negative transactions as well as revenue deferral.

The company has increased its focus on catering, which largely remains an untapped area of growth. Recently, Chipotle, which has about 1% of sales from Catering, expanded catering delivery availability to 1,500 restaurants from 940.

Chipotle opened 35 new restaurants in the first quarter and continues to expect 130-150 new restaurants opening for the full year. Comparable restaurant sales growth is expected to be in the low-single digits range for the full year 2018.

Zacks Investment Research believes the investor should lean towards Chipotle, which provides more stability than Shake Shack.

Meanwhile, 22 out of 34 analysts covering the company is maintaining a “hold” rating. On growth estimates front, analysts are expecting a 30.30% jump in the current year and a 34.50% climb in the next year, while for the next five years, analysts have a 22.70% estimate per annum.

Zacks Investment Research believes that when comparing Chipotle with Shake Shack (SHAK), the investor should lean towards Chipotle, which provides more stability despite tough publicity and other problems. The firm expects Shake Shack as a high growth stock that might provide an opportunity for quick profitability in the short-term.

Chipotle stock had surged 72% since falling just three months ago. Since promoting Taco Bell chief Brian Niccol as its new CEO, the stock has been on fire. The stock has fallen by 8.21% on a 52-week basis but has jumped 44.12% in the past six months.

The stock had been trading between $247.52 and $487.52 for the past 52 weeks.

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