Chipotle Mexican Grill (CMG - Analyst Report) is one super-star stock with both price momentum and the earnings momentum to justify it. Since the company reported a big 15% EPS beat for Q2 in July, the stock has been a Zacks #1 Rank Strong Buy or #2 Rank Buy.

The $3.50 per share reported earnings were 24% higher year-over-year on the back of solid top-line growth. Revenues also beat the consensus mark and increased 29% year over year, thanks to higher "comps" (same store sales) and unit expansion. Despite the recent menu price hike, comps grew year over year as well as sequentially driven by higher traffic.

Chipotle has been witnessing a fairly stable traffic trend over the past few years driven by strong market position, innovative menu launches and increased media exposure.

Given this recent back-drop and the more than doubling of the share price since a July 2012 earnings miss, investors may be looking forward nervously to next Monday October 20 when CMG reports its third quarter results, for which they had also raised guidance in July.

What Makes CMG So Successful?

Obviously, this "burrito machine" has been the premier growth story of fast-casual dining.

Maybe that's because they seemed to so effectively model the extremely efficient food service "machine" that one-time investor, McDonalds (MCD - Analyst Report), perfected with its systems and attention to consistency and details.

And I can tell you from experience that there is almost always a line at the Chipotle stores I see in the Chicago metro area. Delicious, quality food prepared fast and consistently, at a reasonable price and by friendly staff, keeps them coming back for more.

Did I mention healthier-than-your-average fast casual fare and a focus on environmentally-friendly ingredients? Their "Food With Integrity" mantra has strong appeal with many consumers. And if you read about the company's commitment to these programs, you get the sense it's not just for show.

But is the stock reasonably valued for its growth metrics?

My colleague Neena Mishra featured CMG as Bull of the Day in July and addressed this question...

Is the Premium Valuation Justified?

Chipotle's stock in not cheap! Its current trailing 12-month earnings multiple is 58.2x, representing a premium of 76.4% to the industry average. Per Zacks Research, the company's shares have traded in the range of 22.3x to 57.7x trailing 12-month earnings during the last five years.

However Chipotle’s valuation appears to be justified due to its continued strong sales growth despite tepid industry sales trends. With its innovative food culture, effective marketing and a strong business model, Chipotle has a lot of room of grow.

So far, they have been able to attract more and more new customers and keep their customers coming back. Further, the company is likely to realize the full benefit of menu prices increases from the third quarter onwards.

Also, the company still has a substantial untapped potential for growth, particularly in international markets. According to the Wall Street Journal, "at a $20 billion valuation, Chipotle is approaching two-thirds the size of Yum! Brands (YUM - Analyst Report), which has a $33 billion market cap and more than 40,000 of its KFC, Pizza Hut and Taco Bell outlets in 125 countries around the world. Chipotle, by contrast, has just over 1,500 restaurants, only a handful of which are outside the U.S."

Will Slower Growth Deter Hungry Investors?

The current Zacks Consensus for CMG's Q3 bottom line is EPS of $3.84. That's up from $3.47 about 3 months ago before the strong Q2 report. And the analysts as a group believe that successive quarters will have a lot more $4 handles as the consensus estimate for next year climbs to $17.32 from $13.72.

That's 26% earnings growth. But that's also a drop from this year's projected 32% EPS growth. Obviously the company can't keep growing at 30% every year. But that becomes the really important question about when the premium valuation matters.

Right now at a share price of around $650, investors are paying about 38X for next year's $17.32. This is one earnings report I'm watching closely next week to see if that multiple is still appetizing to the institutional investors who have made CMG a super-star stock.