Chipotle (CMG)

Mexican fast-food chain Chipotle (NYSE:CMG) met Wall Streets revenue expectations in Q3 CY2025, with sales up 7.5% year on year to $3.00 billion. Its non-GAAP profit of $0.29 per share was in line with analysts’ consensus estimates.

Company Overview

Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE:CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.

Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.

Some fast-food competitors with similar concepts include CAVA (NYSE:CAVA), Noodles & Company (NASDAQ:NDLS), Potbelly (NASDAQ:PBPB), and Sweetgreen (NYSE:SG).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $11.79 billion in revenue over the past 12 months, Chipotle is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost.

As you can see below, Chipotle’s sales grew at an impressive 14% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.

This quarter, Chipotle grew its revenue by 7.5% year on year, and its $3.00 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 11.2% over the next 12 months, a slight deceleration versus the last six years. We still think its growth trajectory is attractive given its scale and implies the market is baking in success for its menu offerings.

Number of Restaurants

The number of dining locations a restaurant chain operates is a critical driver of how quickly company-level sales can grow.

Over the last two years, Chipotle opened new restaurants at a rapid clip by averaging 8.4% annual growth, among the fastest in the restaurant sector.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Note that Chipotle reports its restaurant count intermittently, so some data points are missing in the chart below.

Same-Store Sales

A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.

Chipotle’s demand has been spectacular for a restaurant chain over the last two years. On average, the company has increased its same-store sales by an impressive 4.2% per year. This performance suggests its rollout of new restaurants is beneficial for shareholders. We like this backdrop because it gives Chipotle multiple ways to win: revenue growth can come from new restaurants or increased foot traffic and higher sales per customer at existing locations.

In the latest quarter, Chipotle’s year on year same-store sales were flattish. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Chipotle can reaccelerate growth.

Chipotle has great unit economics for a restaurant company, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 44.5% gross margin over the last two years. That means Chipotle only paid its suppliers $55.51 for every $100 in revenue.

This quarter, Chipotle’s gross profit margin was 70%, marking a 30.6 percentage point increase from 39.3% in the same quarter last year. Chipotle’s full-year margin has also been trending up over the past 12 months, increasing by 7.2 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold

Chipotle’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 16.7% over the last two years. This profitability was top-notch for a restaurant business, showing it’s an well-run company with an efficient cost structure. This is seen in its fast historical revenue growth and healthy gross margin, which is why we look at all three data points together.

Analyzing the trend in its profitability, Chipotle’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Chipotle generated an operating margin profit margin of 15.9%, down 1.1 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, and administrative overhead grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Chipotle, its EPS declined by 29.2% annually over the last six years while its revenue grew by 14%. We can see the difference stemmed from higher interest expenses or taxes as the company actually improved its operating margin and repurchased its shares during this time.

In Q3, Chipotle reported adjusted EPS of $0.29, up from $0.27 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Chipotle’s full-year EPS of $1.16 to grow 13%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Chipotle has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.4% over the last two years, quite impressive for a restaurant business.

Taking a step back, we can see that Chipotle’s margin expanded by 2 percentage points over the last year. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.

Chipotle’s free cash flow clocked in at $406.2 million in Q3, equivalent to a 13.5% margin. This result was good as its margin was 2.8 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Chipotle’s five-year average ROIC was 18.7%, placing it among the best restaurant companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Chipotle reported $1.42 billion of cash and $4.98 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.32 billion of EBITDA over the last 12 months, we view Chipotle’s 1.5× net-debt-to-EBITDA ratio as safe. We also see its $83.76 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Revenue and EPS were both just in line. Looking ahead, the company lowered full-year same-store sales guidance and is now expecting a decline for 2025. Overall, this quarter could have been better. The stock traded down 13.5% to $34.40 immediately following the results.

Updated: December 4, 2025 at 9:40 PM EST

Are you wondering whether to buy Chipotle or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Chipotle is an amazing business ranking highly on our list. First of all, the company’s revenue growth was good over the last six years. And while its projected EPS for the next year is lacking, its new restaurant openings have increased its brand equity. On top of that, Chipotle’s unparalleled reputation makes it a household name consumers consistently turn to.

Chipotle’s P/E ratio based on the next 12 months is 29.1x. This multiple isn’t necessarily cheap, but we’ll happily own Chipotle as its fundamentals shine bright. We’re in the camp that investments like this should be held for at least three to five years to negate the short-term price volatility that can come with relatively high valuations.

Wall Street analysts have a consensus one-year price target of $43.18 on the company (compared to the current share price of $34.12).