Chipotle (CMG) Stock Up Despite Unidentified Cause of E. Coli Outbreak

NEW YORK (TheStreet) -- Shares of Chipotle Mexican Grill (CMG) are up by 0.16% to $495.87 at the start of trading on Monday despite the company saying it may never know what caused an E. coli outbreak last month.

The Mexican food chain no longer has any of the contaminated ingredients that could be the cause of the outbreak, according to a company spokesman cited by Reuters.

"It is doubtful that testing will ever be able to determine for sure what the cause of this was," the company said.

Other company and health officials investigating the outbreak have also identified the same difficulty in finding the cause of the larger E. coli outbreak at Chipotle in October, which affected at least 50 Chipotle customers in nine states.

Finding an exact cause for the latest E. coli cases "really can be a challenge with the limited information that may be available from the few cases that occurred," Laurence Burnsed, an epidemiologist for the Oklahoma State Department of Health, told Reuters.

Separately, recently, 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 articles's author. TheStreet Ratings has this to say about the recommendation:

We rate CHIPOTLE MEXICAN GRILL INC as a Buy with a ratings score of B. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 12.2%. 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 10.6% 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 ($15.52 versus $14.13).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Hotels, Restaurants & Leisure industry average. The net income increased by 10.8% when compared to the same quarter one year prior, going from $130.80 million to $144.88 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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 gross profit margin for CHIPOTLE MEXICAN GRILL INC is currently lower than what is desirable, coming in at 28.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.90% trails that of the industry average.
  • You can view the full analysis from the report here: CMG

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