Chipotle (CMG) Stock Climbs After Upping Stock Buyback Program
NEW YORK (TheStreet) -- Chipotle Mexican Grill (CMG) - Get Report stock is up by 0.67% to $457.20 in pre-market trading on Thursday, after the Mexican-style food chain increased its previously announced $1.9 billion stock buyback program by $100 million.
The share repurchases are part of the company's efforts to contend with the fallout from a string of disease outbreaks, but investors wonder whether the money would be better spent on technology or restaurant remodeling, Bloomberg reports.
"They did buybacks instead, and it's somewhat surprising," John Gordon, principal at restaurant adviser Pacific Management Consulting Group, told Bloomberg. "We really didn't see much uplift to the stock price. In fact, it fell. So what was the value of the buybacks really?"
Shares are down 4.2% since the past two quarter's buybacks were announced starting February 2. The S&P 500 has risen 9.5% during the same period.
The cost of the repurchases is about twice the amount of cash that the company's restaurants generated during that period, according to Bloomberg data. Chipotle's ratio of stock buybacks to cash from operations in the past year was the third-highest among U.S. restaurant companies.
Separately, TheStreet Ratings team rates the stock as a "hold" with a ratings score of C.
Chipotle Mexican Grill's strengths such as its very decent return on equity which we feel should persist are countered by weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and poor profit margins.
You can view the full analysis from the report here: CMG
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.
