CHIPOTLE MEXICAN GRILL, INC. (CMG): what the price assumes

In the published model solve dated 2026-Q2, anchored at $38.00, CHIPOTLE MEXICAN GRILL, INC. (CMG) is priced for today's economics sustained for ~5.1 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-08-04.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/CMG

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.9% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.

Per-Model Detail (n=15)

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Unlike most of the chains it gets measured against, Chipotle owns and runs its restaurants rather than collecting royalties from franchisees, so the $12.14B of revenue is the whole customer check and the 15.9% operating margin is what survives after paying for the food, the crew and the building.

• The single biggest risk is that the growth engine is construction: the FY2025 annual report states that "Our growth depends on our ability to open new restaurants at an aggressive rate and operate them profitably as soon as possible." and that the cost of opening them keeps rising with construction labor and materials.

• What to watch is the trade-off already visible in the March 2026 quarter, where new openings pushed depreciation higher as a share of revenue and menu price increases were the offset.

Bull Case

Restaurant companies look alike from a distance and are not alike at all. Three questions decide the value of any of them: what one restaurant earns, how many more will fit, and who owns the restaurants. That third question is the one most comparisons skip, and it separates Chipotle from most of the names it sits beside. MCD explains the mechanic in its own annual report, noting that "The contributions to operating margin differ by segment due to each segment's ownership structure". A franchisor books a royalty on somebody else's sales and reports a very high margin on a small revenue line. Chipotle books the entire customer check, pays for the food and the crew and the rent out of it, and keeps 15.9% of $12.14B. Those two margins are not the same measurement wearing different clothes.

Owning the restaurants also means owning the growth. Every new unit is capital the company puts up itself, and the FY2025 report is direct that "Our growth depends on our ability to open new restaurants at an aggressive rate and operate them profitably as soon as possible." The attraction of that model is that nothing in it requires a partner to cooperate, a licensee to invest, or a royalty rate to be renegotiated. It requires sites and crews.

The working-capital mechanic is the quietly beautiful part, and it is disclosed rather than inferred. Guests pay at the counter; suppliers are paid later. The March 2026 quarterly report explains that the company generally has the right to pay for food, beverages and supplies "sometime after the receipt of those items, generally within ten days, thereby reducing the need for incremental working capital to support our growth." A chain that collects cash before it pays for the ingredients funds its own expansion out of the float. Over the trailing year that showed up as $1.51B of free cash flow against $1.91B of operating income, which is an unusually clean conversion for a business pouring money into new buildings.

There is nothing on the liability side to complicate it. The company carries no funded borrowings at all, and 871.4 million dollars of net cash on the funded-debt basis. Capital comes back through repurchases rather than a dividend, and the mechanism is unambiguous in the filing: "All shares of common stock that we repurchase are immediately retired and not held as treasury stock." At December 31, 2025 the FY2025 report showed roughly 1.71 billion dollars still authorized for that purpose.

Two smaller things sit on top. International expansion runs through partners in the Middle East, Mexico and Asia, where the company says it provides "extensive training to our business partners" and requires compliance with its own food quality and safety standards, and the whole non-U.S. line is still only about 2% of revenue. The other is capital intensity, or rather the absence of it. Stated book value is $1.85 per share. The trailing year's profit came to roughly three fifths of that entire book, which is what it looks like when a company needs very little permanent capital to run at this size, and it is a structural advantage that never shows up in a single quarter's comparable sales.

Bear Case

Nobody has a switching cost on a burrito. That is the whole competitive problem, and the peer filings describe it more bluntly than any outside critic would. WEN tells investors its rivals compete on "lower operating costs, better locations, better facilities, more effective marketing and more efficient operations" and, tellingly, that it also competes "with grocery chains and other retail outlets or concepts that sell food to be prepared at home". YUM calls its markets "intensely competitive with respect to price and quality of food products, new product development, digital engagement, advertising". SBUX spent fiscal 2025 rebuilding its own U.S. company-operated store portfolio and converting licensed stores back to company operation. Everyone is fighting for the same lunch hour, the same delivery app placement, and increasingly the same corner lot.

That last one is the pressure point, because the corner lot is where Chipotle's growth comes from. Its own risk disclosure is specific: "At each potential location, we compete with other restaurants and retail businesses for desirable development sites, construction contractors, management personnel, hourly employees and other resources." And the price of winning those contests is rising, with the FY2025 report noting that "The cost of opening new restaurants has continued to increase due to construction labor inflation and increased costs of materials and equipment." A growth model built on opening buildings is exposed to the cost of buildings in a way a royalty model simply is not.

Now put a number on what that engine has to deliver. At roughly 24 times company-wide operating income, today's price embeds operating-profit growth of about 18.6% a year for five years. The rate itself is inside what the company has recently produced. The duration is the demanding part, and the base rate is unkind: among comparable fast growers, only about 39% sustained that kind of pace for five years. The bear case is not that Chipotle stops growing. It is that it grows at a perfectly respectable rate that happens to be slower than the one embedded in the price, at which point the multiple does the damage rather than the business.

The methods make the same point from a different direction. The closest any family of valuation approach comes to today's price is the peer-multiple lens, and the price still sits above it. The earnings-power methods, which capitalize what the business earns today with no growth at all, land far below. So do the cash-flow methods, and so does the asset lens. In other words the only thing standing between this price and the arithmetic is what other restaurant stocks happen to trade at, and several of the largest names in that comparison set are franchisors earning royalties rather than operators earning restaurant margins.

Finally, the clean balance sheet is cleaner in the headline than in the substance. There are no funded borrowings, which is real. But the restaurants are leased, and once those lease commitments are capitalized the position swings from 871.4 million dollars of net cash to something closer to 4.4 billion dollars of net obligations. Rent is a fixed cost that does not fall when traffic does. In a year where transactions slip and menu prices cannot be raised further, that fixed base is what turns a modest revenue disappointment into a sharper decline in the 15.9% operating margin.

Valuation

Every restaurant valuation eventually collapses into two questions: what one location earns, and how many more locations there will be. The market's current answer is aggressive on the second. At $31.81, roughly 24 times company-wide operating income, the price embeds operating-profit growth of about 18.6% a year over the next five years, and a business that holds its position after that. Measured against what Chipotle has recently delivered, the annual rate is not out of character. Sustaining it for five consecutive years is the demanding part, and among comparable fast growers only about 39% managed it.

The four ways of approaching the value disagree sharply, and the direction of the disagreement matters. The peer-multiple family comes closest to today's price without quite reaching it. Everything else lands well below. The earnings-power reading is the starkest: it takes the $1.51B of free cash flow generated over the trailing year and capitalizes it assuming the company never grows again, and the result sits a long way under the market price. That is not an accusation. It is the definition of what a growth premium is, stated in dollars. What a buyer is paying for is the restaurants that do not exist yet.

The operating base underneath is genuinely good. Revenue of $12.14B produced $1.91B of operating income, a 15.9% operating margin, on almost no permanent capital: stated book value is $1.85 per share and the trailing return on equity is 60.3%. Read that combination carefully, because it cuts both ways. It means new restaurants earn back their build cost quickly, which is what makes aggressive unit growth rational. It also means the balance sheet contributes almost nothing to what the shares are worth. Take away the growth assumption and there is no asset value waiting underneath to catch the price.

Cohort comparison needs one adjustment to be honest. MCD's own filing notes that operating margin "differ[s] by segment due to each segment's ownership structure", which is the polite way of saying a franchisor's margin and an operator's margin measure different things. Chipotle is compared against a set that includes MCD, YUM and QSR, which collect royalties, alongside TXRH and DRI, which operate. The multiple that appears to defend this price is drawn from that blended group, and the part of the group that most resembles Chipotle's economics is the part with the lower margins.

Solvency is where the two available readings need naming. On funded debt the company has none, and holds 871.4 million dollars of net cash. On the lease-inclusive basis, which is the one that matters for a chain that rents nearly every building it operates, the position is roughly 4.4 billion dollars of net obligations. Neither figure describes distress. What they describe is a company whose fixed costs are rent rather than interest, and a valuation that therefore turns almost entirely on how many more of those rented buildings get opened, and how quickly each one fills up.

Catalysts

The capital-return machinery is the most concrete dated item in the file. As of December 31, 2025 the company reported roughly 1.71 billion dollars still authorized for repurchasing its own shares, and every share it buys is retired immediately rather than parked as treasury stock. With no dividend and no funded borrowings, buybacks are the only channel through which cash leaves the company, so the pace of that authorization being drawn down is the clearest read on how management sees its own shares.

The March 2026 quarter showed the cost side of the growth engine at work. Depreciation and amortization rose as a share of total revenue, driven by new restaurant openings, with menu price increases providing the partial offset. That is the exchange rate of this business model in miniature: each new building adds fixed cost immediately and sales gradually, and price increases bridge the gap in the meantime. Ingredient costs are managed through supplier pricing protocols that run anywhere from one to 24 months depending on the item, so the next visible pressure on food costs tends to arrive with a lag rather than a shock.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• SBUX (Starbucks Corporation)
• FY2025 10-K: …U.S company-operated store portfolio in the fourth quarter of fiscal 2025, we are focused on empowering coffeehouse leaders to take ownership of sustaining the model as our permanent way of working, which we expect to enhance the customer experience and drive future transaction growth. Further, as announced in early…
• FY2025 10-K: …fourth quarter of fiscal 2025, and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($131 million) following the acquisition of 23.5 Degrees Topco Limited. Partially offsetting this increase was a 1% decline in comparable store sales ($408 million), attributable to a 2%…
• QSR (RESTAURANT BRANDS INTERNATIONAL INC.)
• FY2025 10-K: , interruptions in the availability and delivery of food, beverages, and other supplies to our restaurants or retailers arising from shortages or greater than expected demand may increase costs or reduce revenues. As of December 31, 2025, we have only one or a few suppliers to service each category of products sold at…
• FY2025 10-K: …meets our definition of a restaurant that will be included in our net restaurant growth, we consider factors such as scope of operations, format and image, separate franchise agreement, and minimum sales thresholds. We refer to restaurants that do not meet our definition as "alternative formats" and we believe these…
• YUM (YUM! BRANDS, INC.)
• FY2025 10-K: …stores, coffee shops, snack bars, delicatessens and restaurants (including those in the QSR segment), and is intensely competitive with respect to price and quality of food products, new product development, digital engagement, advertising levels and promotional initiatives, customer service reputation, restaurant…
• FY2025 10-K: . We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts. We intend to support this growth and development through a capital and operating structure that: 30 • Invests capital in a manner consistent with an…
• MCD (McDONALD’S CORPORATION)
• FY2025 10-K: …Operated Markets. Operating margin is defined as operating income as a percent of total revenues. The contributions to operating margin differ by segment due to each segment's ownership structure, primarily due to the relative percentage of franchised versus Company-owned and operated restaurants. Additionally,…
• FY2025 10-K: …charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel. McDonald's Corporation 2025 Annual Report 17 OPERATING INCOME Operating income Amount Increase/(decrease) Increase/(decrease) excluding currency translation…
• WEN (Wendy's Co)
• FY2025 10-K: …lower operating costs, better locations, better facilities, more effective marketing and more efficient operations. Wendy's also competes with grocery chains and other retail outlets or concepts that sell food to be prepared at home. Competition with these chains and other outlets could increase based on the gap…
• FY2025 10-K: …to differentiate based on our focus on high quality food or if Wendy's restaurants fail to deliver an exceptional customer experience, whether at a Company-operated or franchised restaurant, we may experience a decrease in traffic. Further, Wendy's restaurants compete with a variety of independent regional, national…
• YUMC (Yum China Holdings, Inc.)
• FY2025 10-K: …to our business. Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights. 16 2025 Form 10-K Competition Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China…
• FY2025 10-K: …which we operate is highly competitive. The restaurant industry in which we operate is highly competitive with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance…
• TXRH (Texas Roadhouse, Inc.)
• FY2025 10-K: …and as a result we have identified Texas Roadhouse, Bubba's 33, and Jaggers as separate operating segments. In addition, we have identified our retail initiatives as a separate operating segment. Finally, we have identified Texas Roadhouse and Bubba's 33 as reportable segments. The Texas Roadhouse reportable segment…
• FY2025 10-K: …segments. In addition, we have identified our retail initiatives as a separate operating segment. Finally, we have identified Texas Roadhouse and Bubba's 33 as reportable segments. The Texas Roadhouse reportable segment includes the results of our company and franchise Texas Roadhouse restaurants. The Bubba's 33…
• DRI (DARDEN RESTAURANTS, INC.)
• FY2025 10-K: …share). SEGMENT RESULTS We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Chuy's, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Eddie V's, Bahama Breeze and The Capital Burger in the U.S. and Canada as operating segments. We aggregate our operating segments…
• FY2025 10-K: …(CODM). Our CODM uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). Non-cash lease-related expenses from our operating segments…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.