CHIPOTLE MEXICAN GRILL $85.65 New York Symbol CMG.B

CHIPOTLE MEXICAN GRILL $85.65 (New York symbol CMG.B; SI Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 32.9 million; Market cap: $3.1 billion) is a Denver-based chain of Mexican restaurants. Founded in 1993, Chipotle (pronounced chi- POAT-lay) operates in the fast/casual dining segment, offering higher quality food and better decor and service than fast food chains, at slightly higher prices. In the three months ended December 31, 2007, Chipotle’s revenues rose 31.5%, to $288.9 million from $219.7 million a year earlier. Most of the revenue growth came from new restaurant openings, although comparable same store revenues were up 10.6% as well. Same-store growth resulted from an increase in customer visits. The company opened 37 restaurants in the latest quarter. It currently has over 700 restaurants. Earnings rose 61.8%, to $17.5 million or $0.54 a share, from $10.8 million or $0.33 a share. The company holds cash of $151.2 million or $4.60 a share and has no long-term debt. Chipotle’s focus on offering higher-quality food and better decor and service than fast food chains, at slightly higher prices, is paying off. With its “Food with Integrity” initiative, the company uses naturally raised meat wherever possible. For example, 100% of the pork, 50% of the beef and 80% of the chicken it now serves is naturally raised. Chipotle is down from the all-time high of $130 it reached in December, 2007. However, the stock still trades at over 31 times its current earnings forecast. The stock is vulnerable to a further drop if it fails to meet that forecast, or can’t maintain its rapid growth in revenues and profits. Chipotle is still a hold.