Chipotle Mexican Grill Inc (CMG)

Conclusion

Chipotle Mexican Grill operates fast-casual, Mexican-inspired restaurants that sell burritos, burrito bowls, tacos, quesadillas and salads, with outlets in the United States, Canada, France, Germany, South Korea and the United Kingdom. At 35.74 USD on 9 November 2026, the shares carry a market capitalisation of 45.2 billion USD.

The verdict is undervalued. The P/E of 32.8 compares with a ten-year median of 63.6, the EV/EBITDA of 22.2 with 36.6, and the P/FCF of 29.9 with 53.2. The fair value band runs from 36.64 to 54.96 USD with a midpoint of 45.80 USD, a margin of safety of 28.2% at the current price. The DCF gives 30.29 USD per share, below the price, while the fair value from historical multiples is 61.32 USD. The reverse DCF implies growth of 13.9% a year, against a five-year revenue CAGR of 14.8% and a five-year free cash flow per share CAGR of 39.5%.

What holds the case up is a return on invested capital of 19.8% against a WACC of 9.3%, a gap of 10.5% as given, and free cash flow conversion of 109.6% on a trailing basis. What could break it is weak short-term liquidity, with a current ratio of 0.81, and estimate revisions that are falling, with a 90-day change of -5.45% for the current year.

Financial health

Yellow: the Altman Z-score of 5.87 supports the rating, while a current ratio of 0.81 and net debt to EBITDA of 2.09 pull it down. The quick ratio is 0.69 and debt to equity is 2.28. Interest coverage is not available because the company does not report its interest expense. The Altman Z-score sits in the safe zone, although that model was designed for manufacturers and Chipotle is a restaurant operator. Insolvency risk: low, about 0.9% by the estimate of the Ohlson model over one to two years.

Earnings quality

Green: free cash flow conversion is 109.6% on a trailing basis and 100.3% over five years, and the accrual ratio is -6.35%. Stock-based compensation is 0.88% of revenue, leaving free cash flow after it of 1.40 billion USD. The five-year share count CAGR is -1.1%, which points to net buybacks. The Piotroski score is 6 of 9. The Beneish M-score of -2.51 is read as unlikely to indicate manipulation. Over the last eight quarters the company beat estimates four times and missed once, with an average surprise of 0.67%. Estimates are being cut: for the current year the 90-day change is -5.45%, with 27 downward revisions against 1 upward in the last 30 days, and for next year the change is -3.05%, with 22 down against 3 up, although next-year EPS growth is estimated at 22.1%.

Profitability

Green: the gross margin is 23.8% against a ten-year median of 21.5%, the operating margin 14.5% against 9.3%, and the net margin 10.8% against 7.5%. Operating margin stability is 0.55. ROIC is 19.8% against a WACC of 9.3%, a ROIC minus WACC of 10.5% that creates value, and the five-year median ROIC is 21.5%. Return on equity is 56.1%, but the DuPont split shows the leverage at work: a net margin of 12.9%, an asset turnover of 1.33 and an equity multiplier of 3.18, all for 2025. Return on invested capital is the cleaner measure of the business's returns.

Growth

Green: revenue compound growth is 11.4% over three years, 14.8% over five and 10.2% over ten. EPS compound growth is 21.3%, 35.5% and 14.2% over the same periods, and free cash flow per share compound growth is 21.5%, 39.5% and 14.8%. Revenue grew in nine of the last ten years. Analysts estimate next-year EPS growth of 22.1%, which is a rate that lies above the ten-year record but below the five-year one.

Valuation

Green: the verdict is undervalued, with a margin of safety of 28.2%. Today's P/E of 32.8 has a ten-year median of 63.6, a premium of -48.4%. EV/EBITDA is 22.2 against 36.6, a premium of -39.3%. P/FCF is 29.9 against 53.2, a premium of -43.8%. P/S is 3.56 against 4.86, a premium of -26.8%, and P/B is 18.4 against 19.0, a premium of -3.0%. The DCF gives 30.29 USD per share, using a discount rate of 9.83%, first-stage growth of 14.8% and terminal growth of 2.5%; the terminal value accounts for 56.9% of it. The fair value band runs from 36.64 to 54.96 USD with a midpoint of 45.80 USD. These values rest on fixed assumptions, including a 5% equity risk premium and capped growth, so they are not a price target. The reverse DCF implies growth of 13.9%, against revenue growth of 14.8% and free cash flow per share growth of 39.5% over five years. There is no dividend, so the forward yield is 0.

Risks

A current ratio of 0.81 means short-term obligations exceed liquid assets, so a fall in sales would leave little cushion. Net debt to EBITDA of 2.09 means that a drop in EBITDA would raise the debt burden quickly. Falling estimates, with the current-year 90-day change at -5.45% and next year at -3.05%, could mean the earnings base is weakening. Interest coverage is not available, and the cost of debt of 6.9% is an assumption rather than a reported figure. The analysis has no debt maturity schedule and no revenue by segment, so the timing of refinancing and the mix of sales cannot be checked.