IB Net Payout Yields Model

Chipotle Mexican Grill: One Stock To Avoid In 2019

After the market selloff, very few stocks are still overvalued. Chipotle Mexican Grill (CMG) is one of those stocks as the restaurant company continues to trade at extreme premium valuations.

Analysts forecast the company earning less than $12 this year and the stock appears poised to top $450 in another test of the downtrend. If Chipotle can break this downtrend, one definitely doesn't want to get in front of an irrational rally. The key here is to not be caught long when the stock adjusts to normalized earnings.

My research continues to suggest Chipotle is going to hit normalized earnings around $10 per share. For this reason, the stock shouldn't trade at a premium valuation. In comparison to McDonald's (MCD) and Starbucks (SBUX), Chipotle already has the highest multiple of a group of stocks that are rather expensive for their promised growth rates. 

As an example, Chipotle is only forecast to growth revenues by 7.9% in 2019 and that's before any hiccups from transitioning the HQ to SoCal. Us the rally above $450 to short the stock or exit a long, if a breakout doesn't occur.

Disclosure: No position. Please read the disclaimer page for more details.


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