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Macro Pug Dissects the World’s Biggest Burrito – Gali Davidi – Medium

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CMG Price to Earnings 99.74

CMG Forward Price to Earnings 42.07

Due to rapid expansion and negative free cash flow, it’s hard to tell exactly where the P/E actually stands, and many people will argue one metric is better than the next. It has hovered over 80 for the last five years despite management’s guidance lower, and even at 42 they would be relatively expensive. A more rational multiple might be in the 20s or 30s as you can see in the below table comparing CMG to its peers.

One of the talking points bearish analysts highlight is the recession risk, in that they think it would hurt Chipotle’s sales. I tend to disagree with this sentiment, as Chipotle is a cheap healthy option and could even benefit from a recession.

The real recession risk to the stock price is that, during recessions, portfolio managers start trimming positions at the margins. At this lofty valuation, CMG makes a prime candidate for profit taking. Macro Pug’s opinion is that everyone has had too many burritos, and he who panics to the bathroom first will win.

Disclaimer : I plan on entering a short position in CMG, if the right recessionary conditions present themselves. It’s a dangerous stock to short with a small float of shares, and prone to short squeezes. This article is commentary and should not be taken as financial advice.

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