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CHIPOTLE MEXICAN GRILL $229.33 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $7.1 billion; No dividends paid) is a Denver-based Mexican-restaurant chain.
Founded in 1993, Chipotle (pronounced chi-POATlay) charges slightly higher prices than fast-food chains, but offers higher-quality food, including naturally raised meat, and better decor and service.
Chipotle has 1,023 restaurants, including its first outside of the U.S., in Toronto. In April 2010, Chipotle opened a restaurant in London, England.
In the three months ended September 30, 2010, Chipotle’s revenue rose 23%, to $476.9 million from $387.6 million a year earlier. That’s mainly because the company opened 22 new restaurants during the quarter. Earnings per share rose 42.2%, to $1.55 from $1.09. The company holds cash of $211 million, or $6.83 a share, and has no debt.
Chipotle’s shares have more than doubled over the past year. The stock now trades at almost 42 times the $5.50 a share that the company probably earned in 2010. However, Chipotle will open 135 to 145 new restaurants in 2011. That should keep its sales rising, and bring this p/e down to a more reasonable level.
As well, Chipotle plans to test a new brand by opening an Asian-themed restaurant in 2011. This outlet will offer similar “food with integrity” ingredients, pricing and service as the company’s Mexican restaurants. This could be a huge new market for Chipotle.
Chipotle is still a buy.
RUBY TUESDAY, INC. $13.93 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 64.9 million; Market cap: $903.4 million; No dividends paid) owns 676 casual dining restaurants in the U.S. Franchisees run another 140 U.S. outlets, and international franchisees operate 58 restaurants overseas.
In the three months ended November 30, 2010, Ruby Tuesday’s revenue rose 6.2%, to $290.4 million from $273.4 million a year earlier. Same-restaurant sales rose 4.2%. The company’s new menu offerings were a big reason for the higher sales.
The company’s fall menu contained a number of new items, including Fit & Trim entrees, complimentary garlic cheese biscuits, additional side items, an expanded Garden Bar, and an enhanced Sunday Brunch. Ruby Tuesday aims to provide what it sees as a $25 high-quality casual dining experience for $15.
Earnings per share jumped to $0.07 from $0.01 a year earlier. The higher sales, plus good cost controls, were the main reasons for the earnings increase.
The company continues to pay down debt, including $97.5 million over the last year. Its remaining $283.3 million of long-term debt is now a reasonable 31.4% its $903.4-million market cap.
To maintain its profitability, Ruby Tuesday continues to expand slowly and close money-losing restaurants. In 2011, it plans to open just one or two new company-owned restaurants, and will close seven to nine. Franchisees will probably open eight to 13 new restaurants, including up to five outside the U.S.
Ruby Tuesday is a buy for aggressive investors.
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