Is the Recent 17% Drop a Turning Point for Chipotle Stock in 2025?

If you're watching Chipotle Mexican Grill stock right now, you're probably asking yourself one big question: is this dip a buying opportunity, or is there more downside ahead? Over the past month, CMG has seen a decline of roughly 17% in its share price, adding to a year-to-date drop of about 27%. While that may sound alarming at first glance, it's important to put these moves in context. Chipotle is coming off a stellar multi-year run, with the stock having gained more than 67% over the last five years. But recent volatility, coupled with changes in how investors are assessing risk across the restaurant industry, has clearly shifted the mood in the market.

It's not just price action worth considering here. Chipotle's core business is still delivering healthy growth, with revenue up by over 10% and net income growing even faster at roughly 13% annually. Even so, with the stock now trading well below most analyst price targets, the conversation has shifted firmly to valuation. Based on our review of six key valuation checks, Chipotle scores a 2, meaning it is currently undervalued in two out of six important categories. That’s not the best, but it’s not the worst either, and there's more to the story.

Let’s take a closer look at the valuation methods being used for Chipotle, and see what they tell us about the company’s current price. There’s also one approach to valuation that often gets overlooked but may be the most useful of all. We’ll get to that at the end of the article.

Chipotle Mexican Grill delivered -18.7% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Chipotle Mexican Grill Cash Flows

To estimate Chipotle Mexican Grill’s intrinsic value, we can use a Discounted Cash Flow (DCF) model. This method projects the company’s future free cash flows and then discounts them back to today’s dollars. This approach helps investors gauge what Chipotle’s business may be worth based solely on its ability to generate cash over time.

Currently, Chipotle produces Free Cash Flow (FCF) of $1.45 billion. Analysts expect these cash flows to continue growing, reaching over $2.6 billion by 2029. The ten-year projection for free cash flow rises steadily each year, reflecting the company’s robust underlying business growth. Using these estimates and discounting them to their present value, the DCF model arrives at an intrinsic value per share of $37.33.

When comparing this intrinsic value to Chipotle’s current share price, the DCF model suggests the stock is trading at 16.9% above its fair value. This means it is 16.9% overvalued based on projected cash flows alone. While Chipotle’s fundamentals remain strong, this model indicates that the stock may be priced a bit too high right now.

Result: OVERVALUED

Our DCF analysis suggests Chipotle Mexican Grill may be overvalued by 16.9%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Chipotle Mexican Grill Price vs Earnings

The Price-to-Earnings (PE) ratio is a well-established way to value profitable companies like Chipotle Mexican Grill because it reflects how much investors are willing to pay for each dollar of current earnings. Investors tend to reward companies with higher growth prospects and lower perceived risks with higher PE ratios. In contrast, slower-growing or riskier companies typically trade at lower multiples.

Currently, Chipotle trades at a PE ratio of 38x. This is notably higher than the Hospitality industry average of 24x, but it is below the average for direct peers, which is 57x. This indicates that while Chipotle commands a premium over the overall industry, it is still trading at a discount compared to its closest competitors. For additional perspective, Simply Wall St.’s proprietary Fair Ratio for Chipotle is 30.25x, which is based on factors such as earnings growth, market position, and risk profile.

Comparing Chipotle’s actual PE ratio (38x) to its Fair Ratio (30.25x) suggests the stock is currently trading somewhat above what might be considered fair value for its fundamentals. Based on earnings, Chipotle’s shares appear relatively expensive at current levels.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Chipotle Mexican Grill Narrative

Instead of focusing solely on numbers, consider the power of Narratives, which let you create a story that connects your perspective on Chipotle Mexican Grill with assumptions for future growth, margins, and value. A Narrative ties together the company’s journey, your forecast for its finances, and the fair value you assign to the stock. This approach makes the investment decision much more intuitive and personal.

On the Simply Wall St platform, Narratives are an easy tool used by millions of investors to frame these stories, compare Fair Value with the current Price, and decide when to buy, hold, or sell. Because Narratives update instantly as new news and earnings arrive, your view always stays relevant in a changing market.

For example, if you believe Chipotle’s overseas expansion will push earnings to the higher end of analyst estimates, your fair value might align with the $65 price target. Meanwhile, someone more cautious about competition and economic risks could lean toward the $46 target. Your Narrative shapes your investment stance and helps keep you in control.

Do you think there's more to the story for Chipotle Mexican Grill? Create your own Narrative to let the Community know!

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.

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