CMG - Investors Are Convinced They've Found the Next Chipotle
2023-06-19 09:30:00 ET
Since it first came to the public markets with a 100% gain in its 2006 debut, Chipotle Mexican Grill (NYSE: CMG) has been a stock market darling. It routinely trades north of 50 times earnings -- nearly double of most other restaurant stocks, or more. Shares have climbed 45-fold since that initial public offering (IPO) and 375% since the beginning of 2019. So it's no surprise that many chains have launched trying to copy its model: a protein, a base of starch or greens, and a combination of cuisine-specific add-ons.
The latest imitator landed in the headlines after it, too, doubled on its first day of trading. Cava Grill (NYSE: CAVA) is the Mediterranean yin to Chipotle's yang. Three friends of Greek descent opened the first Cava restaurant in 2011. And more than a decade later there are 263 of them in 24 states. After comparing it to other Chipotle knockoffs, it's obvious why Wall Street is excited.
In the documents it filed to go public , Chipotle had about 450 restaurants. By 2007, it had more than 600 locations. That's more than double what Cava has now. At the time, founder Steve Ells bragged about restaurant-level margins of 23.2%. In its initial filings, Cava reported restaurant-level margins of 20% at the end of last year. It's not Chipotle, but it's much better than Noodles & Co. (NASDAQ: NDLS) and Sweetgreen (NYSE: SG) , whose concepts are the salad and Asian versions of the business model.
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Investors Are Convinced They've Found the Next Chipotle