Chipotle Mexican Grill (CMG) Marked As A Barbarian At The Gate

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.

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 $295.1 million.
  • CMG has traded 381,124 shares today.
  • CMG traded in a range 225% of the normal price range with a price range of $19.06.
  • CMG traded above its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 and fresh Mexican food restaurants. As of April 21, 2015, it operated approximately 1,800 restaurants, including 19 Chipotle restaurants and 10 ShopHouse Southeast Asian Kitchen restaurants. CMG has a PE ratio of 4. Currently there are 14 analysts that rate Chipotle Mexican Grill a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Chipotle Mexican Grill has been 515,400 shares per day over the past 30 days. Chipotle Mexican Grill has a market cap of $19.3 billion and is part of the services sector and leisure industry. The stock has a beta of 0.57 and a short float of 4.1% with 2.58 days to cover. Shares are down 10.5% year-to-date as of the close of trading on Wednesday.

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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 robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 20.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CHIPOTLE MEXICAN GRILL INC has improved earnings per share by 47.0% 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 $14.13 versus $10.46 in the prior year. This year, the market expects an improvement in earnings ($17.39 versus $14.13).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 47.6% when compared to the same quarter one year prior, rising from $83.07 million to $122.64 million.
  • Net operating cash flow has increased to $242.72 million or 35.01% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.49%.
  • Powered by its strong earnings growth of 46.96% and other important driving factors, this stock has surged by 25.62% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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