QS Research · Michael Burry's Scion Capital analyst template · 2006
CHIPOTLE MEXICAN GRILL INC (CMG)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $35.92 (close 2026-11-10)
Conclusion: SHORT
Conviction medium · base case -40% · downside -41% · upside +15%
The market is still paying a growth-concept P/E for a business whose 2026 profit line is shrinking: TTM net income is $1.38B (N15) and Q3 2026 EPS fell 6.9% as restaurant-level margin dropped to 23.3% from 24.5% (S31). At 33.0x TTM P/E and 20.4x EV/EBITDA (N30, N27), CMG trades far above the 19.95x peer median; that anchor on TTM earnings is $21.72, -40% (N55). The downside case cuts earnings 26% and prices them at a compressed ~26.5x P/E (halfway from 33.0x to 19.95x), giving about -40.6%; the upside case adds 15% earnings at today's 33.0x, giving +15%. Net cash of $902.6M and 20.4% ROIC are real (N23, N43), but a 3.3% FCF yield (N31) does not protect a premium multiple when Q4 restaurant margins are guided below 22% (S9); this is a short/AVOID, not a value long. The stated exposure stress is $0.00/share (N51), so it does not change the case.
Key numbers
- Share price: $35.92
- Market cap: $45.44B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $12.71B
- EV / EBITDA (TTM): 20.4x
- P/E (TTM): 33.0x
- FCF yield: 3.3%
- Price / book: 18.51x
- EV / FCF (TTM): 29.5x
- Revenue growth (latest fiscal year): +5.4%
- ROIC (TTM): 20.4%
- WACC: 7.6%
- Economic profit spread: +12.8 pts
The 15 boxes
- ✓ 1. Long-form business notes
Chipotle is a one-segment, predominantly company-owned restaurant operator: revenue comes from restaurant sales, and at 12/31/2025 it had 3,938 U.S. and 104 international company-owned units plus 14 international partner-operated units. The first restaurant opened in Denver in 1993. Between FY2020 and FY2025 the footprint, digital mix and strategy changed: revenue rose from $5.98B to $11.93B, operating income from $290.2M to $1.94B, and buybacks from $54.4M to $2.43B; TTM to Sep 2026 revenue was $12.71B but operating income was $1.79B. The provided sources do not give AUV, restaurant-level margins or payback.
- ✓ 2. Competitive advantage
Chipotle's sources show a strong brand and a claimed quality/sourcing advantage, but the 10-K itself says the restaurant industry is highly competitive and many rivals make similar ingredient claims, so the differentiation is not exclusive. FY2020-FY2025 revenue, operating income and net income grew sharply, but operating income fell to $1.79B TTM to 2026-09-30 from $1.94B in FY2025 while revenue rose to $12.71B from $11.93B, pointing to recent margin pressure. The only durable assets the sources identify are trademarks and trade dress; they do not document a cost, network or switching-cost moat.
- ✓ 3. 10-Q takeaways
Q3 2026 (three months ended September 30, 2026) revenue rose 9.6% to $3,293.2 million on comparable restaurant sales of +2.1% (average check +1.3%, transactions +0.8%), but operating margin fell to 13.7% from 15.9% and restaurant-level operating margin to 23.3% from 24.5%, with diluted EPS $0.27 versus $0.29 as labor (+0.5 pt) and other operating costs (+1.0 pt) more than offset a 0.5 pt food-cost gain. Comps were hit by low-single-digit headwinds in July 2026 tied to U.S. food safety concerns and geopolitical developments that normalized by end-August. Nine-month operating cash flow was $1.9 billion, and the company repurchased $110.0 million of stock in Q3 2026 with $1.6 billion of authorization left. Management reiterated numeric FY2026 guidance (low-single-digit comps, 350-370 openings, 24-26% underlying tax rate) and gave FY2027 unit guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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