Trade-Ideas: Chipotle Mexican Grill (CMG) Is Today's Strong On High Relative Volume Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Chipotle Mexican Grill ( CMG) as a strong on high relative volume 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 $176.2 million.
  • CMG has traded 593,048 shares today.
  • CMG is trading at 14.57 times the normal volume for the stock at this time of day.
  • CMG is trading at a new high 7.05% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CMG:

Chipotle Mexican Grill, Inc. develops and operates fast casual and fresh Mexican food restaurants. Its restaurants primarily offer burritos, tacos, burrito bowls, and salads. As of June 3, 2013, the company operated 1,450 restaurants. Chipotle Mexican Grill, Inc. CMG has a PE ratio of 40.7. Currently there are 10 analysts that rate Chipotle Mexican Grill a buy, 1 analyst rates it a sell, and 13 rate it a hold.

The average volume for Chipotle Mexican Grill has been 399,700 shares per day over the past 30 days. Chipotle Mexican Grill has a market cap of $11.6 billion and is part of the services sector and leisure industry. The stock has a beta of 0.54 and a short float of 11.6% with 6.32 days to cover. Shares are up 26.7% year to date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Chipotle Mexican Grill as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 13.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CMG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.87, which clearly demonstrates the ability to cover short-term cash needs.
  • CHIPOTLE MEXICAN GRILL INC has improved earnings per share by 24.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CHIPOTLE MEXICAN GRILL INC increased its bottom line by earning $8.75 versus $6.76 in the prior year. This year, the market expects an improvement in earnings ($10.63 versus $8.75).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 22.2% when compared to the same quarter one year prior, going from $62.66 million to $76.58 million.
  • Net operating cash flow has significantly increased by 326.36% to $125.25 million when compared to the same quarter last year. In addition, CHIPOTLE MEXICAN GRILL INC has also vastly surpassed the industry average cash flow growth rate of 8.13%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.
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