Is Now The Time To Put Chipotle Mexican Grill (NYSE:CMG) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Chipotle Mexican Grill (NYSE:CMG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Chipotle Mexican Grill

How Quickly Is Chipotle Mexican Grill Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Chipotle Mexican Grill's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 49%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Chipotle Mexican Grill shareholders can take confidence from the fact that EBIT margins are up from 6.6% to 11%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Chipotle Mexican Grill's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Chipotle Mexican Grill Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$36b company like Chipotle Mexican Grill. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$274m. We note that this amounts to 0.8% of the company, which may be small owing to the sheer size of Chipotle Mexican Grill but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

Does Chipotle Mexican Grill Deserve A Spot On Your Watchlist?

Chipotle Mexican Grill's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Chipotle Mexican Grill for a spot on your watchlist. However, before you get too excited we've discovered 1 warning sign for Chipotle Mexican Grill that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.