Last update on 2024-06-06

Chipotle Mexican Grill (CMG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Explore our Piotroski F-Score analysis for Chipotle Mexican Grill (CMG) in 2023, featuring perfect 9/9 score, growth insights, and financial health indicators.

Short Analysis - Piotroski Score: 9

We're running Chipotle Mexican Grill (CMG) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Chipotle Mexican Grill (CMG) scored a perfect 9 on the Piotroski F-Score, which measures financial strength based on profitability, liquidity, and operating efficiency. 1. Profitability: CMG's net income increased to nearly $1.23 billion in 2023 from a loss of $7.7 million in 2003. Operating cash flow (OCF) rose to around $1.78 billion, and both ROA and OCF have shown consistent growth. Importantly, OCF exceeded net income, indicating solid earnings quality. 2. Liquidity: The company demonstrated strong current ratio growth, though leverage saw a slight increase. The number of outstanding shares decreased, showing stock buybacks and management confidence. 3. Operating Efficiency: Both the gross margin and asset turnover ratio improved, though CMG still lags behind the industry average in gross margin.

Insights for Value Investors Seeking Stable Income

Based on this exceptional Piotroski F-Score of 9, Chipotle Mexican Grill (CMG) appears to be a financially strong and well-managed company. The consistent improvements in profitability, liquidity, and operational efficiency suggest it's a solid candidate for investment. Though its gross margin is below the industry average, the company has shown significant progress and there is potential for further gains. Overall, CMG is worth considering for your investment portfolio.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Chipotle Mexican Grill (CMG)

Company has a positive net income?

Net income measures the company's total earnings and profitability. A positive net income indicates financial health and profitability.

Chipotle Mexican Grill has achieved a net income of $1,228,737,000 in 2023. This represents a positive trend and solid financial performance. Over the past 20 years, CMG has shown consistent growth from a net loss of $7.7 million in 2003 to the present figure, reflecting robust business expansion and increased profitability. This positive net income adds 1 point to the Piotroski Score.

Company has a positive cash flow?

Analyzing CFO involves evaluating cash inflows from operational activities, which is a critical indicator of a company's profitability and efficiency in its core business.

With a CFO of $1,783,477,000 in 2023, Chipotle Mexican Grill (CMG) marks a positive trend, continuing its upward trajectory from previous years. Since CMG shows sustained growth in CFO following a consistent upward trend over the past two decades, it demonstrates solid operational efficiency. Specifically, CFO increased from $22,069,000 in 2003 to $1,783,477,000 in 2023, an incredible growth sign, highlighting the firm's robust cash generation capability.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) indicates the company's efficiency in generating profits from its assets year over year.

The ROA for Chipotle Mexican Grill (CMG) increased from 0.1324 in 2022 to 0.1641 in 2023, indicating a point increase of 1 in this criterion. This improvement demonstrates Chipotle's enhanced efficiency in turning its assets into profitable endeavors. When comparing historical performance, CMG's improvement in ROA is part of a steady upward trend from past years, exemplifying an ongoing enhancement in asset utilization. Further strengthening this narrative, industry's median ROA in 2023 stood at 0.3206, not far very ahead from CMG’s ROA, thereby positioning CMG favorably within the competitive landscape. This consistent improvement can be correlated with their better cash utilization reflected in the steadily growing operating cash flows. In fact, CMG's operating cash flow zoomed significantly from about 68 million USD in 2003 to a substantial 1.78 billion USD in 2023.

Operating Cashflow are higher than Netincome?

One of the Piotroski criteria assesses whether the Operating Cash Flow (OCF) is higher than the Net Income. This suggests that the company's earnings are backed by actual cash flows, indicating high earnings quality.

For the fiscal year 2023, Chipotle Mexican Grill (CMG) reported an Operating Cash Flow (OCF) of $1,783,477,000 and a Net Income of $1,228,737,000. Since the OCF is higher than the Net Income by $554,740,000, Chipotle earns a point under this Piotroski criterion. Historical data further supports a consistent trend where CMG’s Operating Cash Flow generally exceeds its Net Income, reinforcing the reliability of its earnings. For instance, in 2022, OCF stood at $1,323,179,000 versus a Net Income of $899,101,000. The predominance of OCF over Net Income over a prolonged period signifies robust operational efficiency, enhancing investor confidence in CMG’s financial health.

Liquidity of Chipotle Mexican Grill (CMG)

Leverage is declining?

Change in leverage examines a company's debt level compared to its equity. A decrease is favorable as lower leverage indicates reduced financial risk.

The leverage for Chipotle Mexican Grill has increased from 0.4728 in 2022 to 0.5045 in 2023, meaning leverage increased. Consequently, for the Piotroski Analysis, this criterion scores 0 points. Assessing the 20-year trend, Chipotle has generally maintained conservative leverage levels, with a notable jump starting in 2019. The slight uptick in 2023 may suggest temporarily higher reliance on debt or equity financing but is not alarmingly high when examined in the broader historical context.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. A higher ratio indicates better liquidity.

Chipotle Mexican Grill (CMG) witnessed an increase in its Current Ratio from 1.2755 in 2022 to 1.5726 in 2023, reflecting improved liquidity. This is favorable, marking a positive trend attributable to better management of current assets vis-à-vis short-term liabilities, thereby earning 1 point. Historically, while Chipotle's Current Ratio has fluctuated - peaking at 3.5753 in 2014 and dipping to a lowest of 0.2047 in 2003, it generally stays well above the Industry Median which was 0.777 in 2023. This sustained higher ratio relative to the industry median underscores Chipotle's robust liquidity position.

Number of shares not diluted?

Change in shares outstanding can indicate corporate actions such as stock buybacks or issuance. A decrease often suggests stock buybacks, reflecting confidence in future prospects.

Chipotle Mexican Grill's outstanding shares decreased from 27,851,000 in 2022 to 27,555,000 in 2023, adding 1 point in the Piotroski Analysis. This trend signifies stock buybacks, a positive indication of management's confidence in the company's financial health and future performance. Historically, CMG's outstanding shares peaked at 56,090,651 in 2004 but have since generally trended downwards, reinforcing the ongoing buyback strategy.

Operating of Chipotle Mexican Grill (CMG)

Cross Margin is growing?

The criterion involves evaluating the change in the company's gross margin from one year to the next, which reflects its efficiency in managing production costs relative to its revenues. An increase generally suggests better cost management or improved pricing power.

The Gross Margin for Chipotle Mexican Grill (CMG) increased from 0.2388 in 2022 to 0.262 in 2023. This represents an improvement in its ability to manage production costs relative to its revenue. Looking at the last 20 years, the Gross Margin has followed an upward trend in many years, peaking at 0.536 in 2004 and hitting lows such as 0.1276 in 2016. This increase in 2023 can be viewed positively, indicating improved operational efficiencies or possibly better pricing strategies. When compared to the industry median Gross Margin of 0.3206 for 2023, CMG still lags behind the industry, implying there is room for further improvements. Nonetheless, the positive trend for 2023 earns 1 point in the Piotroski Score.

Asset Turnover Ratio is growing?

Assessing the change in Asset Turnover provides insights into how efficiently a company uses its assets to generate sales. It's crucial for understanding improvements or declines in operational efficiency.

The Asset Turnover ratio for Chipotle Mexican Grill (CMG) has increased from 1.2716 in 2022 to 1.3187 in 2023. This represents an improvement in how efficiently the company is using its assets to generate revenue, signaling a positive trend. Historical data over the last 20 years, showing variances but generally high ratios, underscore this as a robust aspect of the company's operational efficiency. Thus, 1 point is added for this criterion.