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Author: FoolishMage Big red star, 1000 posts Old School Fool Home Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 434  
Subject: Da Bull Date: 10/12/2007 1:05 PM
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From the our recent Bull and Bear discussion on the Rule Breaker's Board:

CMG’s Question brings you Duelling Answers. Prepare for:“Da Bull!”

by Foolishmage September 29, 2007

“Can CMG continue to grow at current pace for the next 5-10 years?” That is the Question we are dueling over. The Anwer? I say a hearty, salsy, “Yes!” Is there habañero salsa on my brokerage account because this stock is hot!

This Fool is not going to bore you with numbers right off the bat. As my once favorite politician said, "stop playing those number games”. Ross Perot had it right.

Mm, burritos!:


If I told you there was a restaurant that served burritos fast, fresh, mostly organic, and tasty for a reasonable price would you be interested in eating there? If I then mentioned that this company was spun-off from the most successful restaurant in history, McDonald’s, would that spark your interest in the stock? I bet it would! This company, Chipotle Mexican Grill, is making a run for the bulls, err, I mean burritos.

Chipotle makes a fine product. They deliver something unique, yet so simple in the crowded niche of Mexican restaurants. It goes without saying, although I will say it, Chipotle has either the top management team, or really close to it, when it comes to running a successful restaurant. These are former McDonald’s executives and these guys and gals know how to hawk burgers; and in this case burritos.

There are two key features of Chipotle that really make it stand out and will allow for its growth over the next couple of decades. We can see these aspects of success through the lens of other companies that have achieved greatness. Subway is a great example. We all know when you enter Subway; you start from the left, move to the right and customize your own sandwich. Chipotle is capitalizing on this technique as well. Study up on the latest revolutions changing the world, and you will find that the power to customize your purchases is high up on the list. It’s where we are going as a culture. The technology is there, so why not? Dell Computer, Jones Soda, and Subway are just a few of the companies that allow customers to individualize their purchases. Another powerful, yet basic principle behind Chipotle’s eventual success is its simple menu. This simple nature of Chipotle’s menu is sheer genius. This is how McDonald’s built its empire. Make no mistake, the customizable, basic menu that Chipotle offers is part of what will make this company a household name over the next decade.


Hungry for numbers?:


This company’s target market is EVERYONE. CMG has grown earnings 46% in 5 of the last quarters. Is its price to earnings ratio a little high? Yes. It’s around double of established restaurants such as Starbucks and McDonald’s. Of course that P/E is well deserved as operating margins are increasing right along with those earnings. Suffice it to say the company is operating on all cylinders delivering tremendous profit.

The company currently operates around 600 or so restaurants. The current goal is to open 95-105 restaurants in fiscal year 2007. Chipotle can easily keep up that pace for 5-10 years. Is there, as we Fools like to say, “room to run?” A resounding yes, I must say. Look at Starbucks. That operation has reached into over ten thousand coffee houses. McDonald’s has over 13,000 restaurants in the U.S. and over 31,000 in the world. Is the product that Chipotle makes marketable all over the world? Again I say yes. The burritos that Chipotle makes can and will catch on, potentially all over the world.

In closing, Chipotle is following in the hallowed footsteps of companies like Subway and McDonald’s. The business is sound, the management is top notch and the world always needs a great place to eat. Take a look at the similarities between these industry titans, Subway and McDonald’s. Chipotle is on the same track these companies took at least 20 years ago. Chipotle has everything going for it. It’s a tidal wave of good things. The management is impeccable. The food is delicious. They try to maintain the healthy angle by using organic ingredients wherever possible. We all like burritos, but it doesn’t hurt that the Hispanic segment is growing so quickly. Get in line and grab a burrito. While you are at it, you might as well buy some stock. You won’t be sorry you did.

Yours Foolishly,

FoolishMage
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