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Chipotle Is An Undervalued Growth Stock

Chipotle is growth non-cyclical. The industry is mature: The fast-casual restaurant industry in the U.S. isn't going to have high sales growth rates. In some countries the industry is in the growth stages. Additionally, some firms within the industry are growth firms and some benefit from growth in high growth countries. Chipotle is a growth firm that primarily operates in mature markets.


The restaurant industry is a tough business to earn a profit. Chipotle is a valued brand and is increasing revenue and net income annually. Chipotle has the potential to become one of the largest fast-casual restaurant chains in the United States.


The total number of restaurants increased 16.4 percent in 2012's second quarter compared to the year-ago quarter. If Chipotle continues to open restaurants at a double-digit growth pace, the valuation may continue to represent the premium investors pay for growth. Revenue grew faster than total number of restaurants increased.


The relatively high price-book value ratio suggests investors perceive the growth opportunities of Chipotle to be favorable. Further, the valuation metric declined nearly 50 percent from its peak and is at pre-2011 levels.
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