Trade-Ideas: Chipotle Mexican Grill (CMG) Is Today's "Barbarian At The Gate" Stock

Trade-Ideas LLC identified Chipotle Mexican Grill (CMG) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Chipotle Mexican Grill

(

CMG

) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Chipotle Mexican Grill as such a stock due to the following factors:

  • CMG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $504.8 million.
  • CMG has traded 2.1 million shares today.
  • CMG traded in a range 208.3% of the normal price range with a price range of $22.72.
  • CMG traded above its daily resistance level (quality: 44 days, meaning that the stock is crossing a resistance level set by the last 44 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on CMG:

Chipotle Mexican Grill, Inc., together with its subsidiaries, develops and operates fast-casual fresh Mexican food restaurants. As of December 31, 2015, the company operated 1,971 Chipotle restaurants in the United States; 11 in Canada; 7 in England; 4 in France; and 1 in Germany. CMG has a PE ratio of 41. Currently there are 8 analysts that rate Chipotle Mexican Grill a buy, 4 analysts rate it a sell, and 13 rate it a hold.

The average volume for Chipotle Mexican Grill has been 1.1 million shares per day over the past 30 days. Chipotle Mexican Grill has a market cap of $12.3 billion and is part of the services sector and leisure industry. The stock has a beta of 0.33 and a short float of 15.4% with 3.86 days to cover. Shares are down 12.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Chipotle Mexican Grill as a

hold

. The company's strongest point has been its very decent return on equity which we feel should persist. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and poor profit margins.

Highlights from the ratings report include:

  • The revenue fell significantly faster than the industry average of 10.7%. Since the same quarter one year prior, revenues fell by 23.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CHIPOTLE MEXICAN GRILL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CHIPOTLE MEXICAN GRILL INC increased its bottom line by earning $15.09 versus $14.13 in the prior year. For the next year, the market is expecting a contraction of 68.6% in earnings ($4.74 versus $15.09).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, CHIPOTLE MEXICAN GRILL INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 121.6% when compared to the same quarter one year ago, falling from $122.64 million to -$26.43 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.24%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 122.68% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, CMG is still more expensive than most of the other companies in its industry.

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