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Chipotle Mexican Grill (NYSE:CMG) shareholders have earned a 33% CAGR over the last five years

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Chipotle Mexican Grill, Inc. (NYSE:CMG) share price. It's 324% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 23% gain in the last three months.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Chipotle Mexican Grill

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

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During five years of share price growth, Chipotle Mexican Grill achieved compound earnings per share (EPS) growth of 48% per year. This EPS growth is higher than the 33% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. Having said that, the market is still optimistic, given the P/E ratio of 64.03.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
earnings-per-share-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Chipotle Mexican Grill's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Chipotle Mexican Grill has rewarded shareholders with a total shareholder return of 59% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 33% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.