Casual dining restaurant space Chipotle Mexican Grille (NYSE:CMG) has been doing well in recent months. And to prove it, its stock is trading near its 52-week high. But will the momentum continue?
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Will the Sizzle Continue?
The type of quick service food that Chipotle serves will remain quite popular in the near-term because not only is it tasty and convenient, its also relatively inexpensive when compared to some of its popular full-service counterparts.
The company has also been trouncing analyst expectations in recent quarters. In fact, its exceeded expectations by a pretty good margin for three quarters straight. According to CNBC, Chipotle is expected to release its third quarter numbers on October 21. Wall Street expects the company to earn 86 cents a share. Most likely, it will exceed that estimate by at least a couple of cents. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)
If that doesn't happen, and the company misses, some existing investors might be turned off and book profits. Why? Because again the shares have been on a roll and the company has had a good track record in recent quarters of exceeding expectations. A miss could break up the momentum.
The shares trading near their 52-week high can be a positive, in that it may help it to obtain a larger following among investors. However, the run up in the share price means that the company presently trades at 28-times this year's estimate, which, according to data on Yahoo! Finance, is $3.41.
The Dish on Other Major Players
I've been bullish on McDonalds (NYSE:MCD) for quite some time now. Its low prices (and specifically its dollar menu), its convenience and it menu offerings make it really attractive. It trades at 14.7 times this year's estimate.
Burger King (NYSE:BKC) shouldn't be bypassed either. It is an impressive player, and is fighting heavily for lunch and dinner traffic and late night diners. It trades at 11.9 times this year's estimate.
Yum Brands (NYSE:YUM) and Starbucks (Nasdaq:SBUX) are two other companies worth a mention because of their foothold in the lunch and dinner meals. Starbucks isn't on sale by any stretch as it trades at 26.9 times this year's estimate. Meanwhile Yum, includes Taco Bell and KFC, trades at 15.6 times this year's estimate, which is near its 52-week high.
The Bottom Line
From the consumer perspective, Chipotle is appealing. But from an investor perspective, it's just a little too expensive right now. However, it has a good chance of exceeding expectations in the quarter that is to be announced in October. (For a related reading, check out Sinking Your Teeth Into Restaurant Stocks)
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