Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. Not every pick can be a winner, but when you pick the right stock, you can win big. Take, for example, the Chipotle Mexican Grill, Inc. (NYSE:CMG) share price, which skyrocketed 342% over three years. On top of that, the share price is up 11% in about a quarter. But this could be related to the strong market, which is up 13% in the last three months.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Chipotle Mexican Grill was able to grow its EPS at 18% per year over three years, sending the share price higher. This EPS growth is lower than the 64% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth. This optimism is also reflected in the fairly generous P/E ratio of 162.87.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Chipotle Mexican Grill's key metrics by checking this interactive graph of Chipotle Mexican Grill's earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that Chipotle Mexican Grill shareholders have received a total shareholder return of 60% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 27% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Chipotle Mexican Grill in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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