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Chipotle (CMG) is a great fast casual restaurant chain that is doing everything right – but there are limits to the multiple applied to a company that sells burritos. CMG has been one of the best stocks in the market for a long time culminating with a run up in its shares to nearly $3,500 prior to a recent 50-1 split.

CMG reported excellent 2Q24 earnings after the close Wednesday. Comps were +11.1% and Adjusted EPS increased 36% to 34 cents. The problem is valuation. CMG is trading at 40x forward earnings and each of its 3,530 locations is valued at an average of $20 million – and they don’t own any of the real estate.

As much as I like the food, I’m a seller of CMG stock.

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