Chipotle Mexican Grill (NYSE: CMG) has been one of the most reliable growth stocks on the market since its IPO in 2006.
With the exception of the three-year period when the company’s performance was marred by an E. coli outbreak, Chipotle has delivered solid growth year in and year out.
The company recently announced a 50-for-1 stock split, rewarding longtime shareholders with an upcoming reset in the stock price as the stock has been more than a 50-bagger since its IPO.
Chipotle’s five-year performance
Over the last five years, Chipotle shares have jumped an impressive 346%. As the chart below shows, much of those gains have come in the last six months or so, helped in part by the stock-split announcement.
A gain of 346% would have turned $10,000 invested in Chipotle five years ago into $44,460 today.
Can Chipotle keep gaining?
Maintaining that growth rate won’t be easy for Chipotle stock as it now trades at a lofty price-to-earnings ratio of 68, meaning that future gains in the stock will likely come from earnings growth rather than multiple expansion.
Additionally, that high multiple puts Chipotle at risk of a pullback if the company’s results disappoint.
At this stage of its life cycle, the burrito roller has built several solid competitive advantages, including a loyal customer base, a strong digital platform, and execution in the form of its rapid throughput. However, steady growth isn’t assured.
Overall, Chipotle still looks like a good bet to continue beating the market, but the soaring performance over the last five years will be difficult to repeat.
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Jeremy Bowman has positions in Chipotle Mexican Grill. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
If You’d Invested $10,000 in Chipotle Stock 5 Years Ago, Here’s How Much You’d Have Today was originally published by The Motley Fool
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