any thoughtsI bot the stock higher than here on sentiment but that was predicated on:1) the strong balance sheet, which remains in place2) muted margins that would recover, though this looks to be muted longer than expected due to traffic issues3) a near 10% unit growth rate which is now a 6% growth rate for 2018 and no acceleration at best until late 20194) some odd comments about adding menu items (frozen margaritas? really?) which are at odds with history and then hopes for catering which all about add sales at the margins and is reflective of what slower growing companies focus on and5) hopes for an expanding valuation, which seems diceyMost estimates are around 9.00 for next year, or 275/9 or 30.5x. This is absurdly high for most restaurants, but CMG is a good concept which generates strong returns. So the sentiment argument is kinda dead unless they do a magical 10% comp one quarter...you never know, but it seems less likely than it used to be......If you switch to owning CMG as a business Using some basic assumptionsIf they do 4.4b in sales (now) and 5% net gets you to 220mAt 7% it equals 308mAdd 5% unit growth and 2.5% comps and sales might be 4730or 5% at 237m and 7% at 331mThey did 10.8% at the peak. 5% is very realistic, 7% more challengingSo at 7400 (cap sans cash, more or less)7400/220 = 33.6x7400/308 = 24.1x7400/237 = 31.2x7400/331 = 22.4xI'd pay 20x without question think they can continue to expandand it generates a lot of cashBut then again, 6% unit growth, muted comps, and clearly a fast grower valuation seems unlikelythey are doing the first price increase in a lot of the chain in Nov which ought not to be felt much - they are still pricing just fine IMO and an bump-up won't mean much--I have a small dink and not inclined to add or subtractI do think sales can grow 5% to 10% for a while......which makes me more likely to be patient at this position sizeposition size is...0.1% to 0.2%--thoughts? and I know - for 0.1% to 0.2% who cares, but I care
muted margins that would recoverHow is CMG's margin compare vs casual dining peer's?
i think you compare it to fast casual units cost 800knot 3-4m and morei don't know franchise/owned split either which makes it hardBWLD did 6.2% net margin 2014DNKN did 25.2% in 2016 (but franchiser)DPZ did 8.7% in 2016PZZA did 5.6% in 2016it is hard to find a true comparenot sure it is relevantquestion is if they can return to sales levels they had beforejury is out but suggests nobut they can move it up - price increases and eventual end to bad luck news
I want to own CMG but don't want to ruin one of my happiest stories.I think their food tastes less good than it was 2 years ago. I don't know if they have to prepare/heat things differently or what but...And staff seem to be less on top of things. It is a very simple model they have but more and more they screw things up. I think they CAN do a price increase without issue.I think store locations have to be less good than existing so store growth might not bump things as much as in the past. My BIGGEST concern is, what happens if they have another semi-big health scare? It might be enough to send the masses away.Why are restaurants hurting? Wages at highs. Unemployment at lows. Are people eating out less or are choices just growing faster and there are more people sharing the pie?CMG is still my favorite lunch spot. calories/$ is hard to beat. Taste is better than most. Personally, I wish they reduced the salt content by 1/2 but I'm sure that'd hurt sales.
writing that make me realize my original thesis was deadso I've ditched it and will revisit next rotation
I don't know much about CMG as a company/stock, but it doesn't strike me as particularly attractive. No longer growing like it once was. The stock may do well, but, at least at first glance, it doesn't strike me as compelling.As a customer, I like CMG. I probably prefer it to the similar Mexican quick service places I've been (Qdoba, Baja Fresh, Moe's). I assume Qdoba is the one with the most locations. My local Qdoba is too slow, but the seating is better than at Chipotle. Chipotle's are generally small and don't have a ton of tables. Maybe APO will buy Qdoba and fix the speed issue.I agree with the pundits - Chipotle's new queso sucks. Not sure how you can spend years working on queso and come up with that. If making it "natural" was such a problem, I think they should have tried a cheese/queso option that was a lot different than other chains - maybe something not that smooth at all. I don't know, but, what they did wasn't any good.Gun to my head, I would buy CAKE instead (I think you bought and sold some of that recently). I don't think CAKE is "compelling" yet either. But, I like it's traditional price metrics better.GnV
Forgot to mention, my wife actually likes California Tortilla the best. Not a public company. From our visits, it doesn't seem as though they do Chipotle-like business.
No longer growing like it once was. fwiw, that was they key factoid for me - they ratcheted down the growth rate and talk of menu item additions and catering and all that is not the real verbiage of a growth companyhonestly, it was a spec position that has to be evaluated as an investment nowit didn't workfwiw, I punted CAKE from my universe - I can't see it as a meaningful position cause I don't want to trade it given their story; like everyone else, I want growth
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |