Should You Buy Chipotle (CMG) Stock in 2026?

2026-07-13 · By Lubin Danilo, founder of Lubin Investment

CMG: see the full analysis on Lubin Investment

Chipotle passes all 10 of my quality criteria, a perfect score I reserve for a handful of stocks. Its cash generation grows 26% a year. The valuation multiple looks high at first glance (34 times annual cash flow), but my model, which accounts for that growth, sees a discount instead. The real question isn't quality, already excellent, but whether that growth rate can hold up after a 2025 sales slowdown.

Chipotle, the company behind the burrito

Chipotle Mexican Grill runs more than 3,500 restaurants, almost all company-owned rather than franchised (unlike McDonald's or Burger King). That choice costs more to build out, but gives the company full control over quality, service, and margin at every location. The concept: a build-your-own burrito and bowl chain, assembled in front of the customer, with ingredients marketed as fresher than typical fast food.

The perfect score: what justifies it?

In my 10-criteria screener, Chipotle passes all of them: profitability (12% net margin), sales growth (13.6% a year over 5 years), and above all, free cash flow per share growth of 26.3% a year, a rare pace for a restaurant chain already this large. Return on invested capital reaches 20.2%, well above the cost of capital. The company also buys back its own shares (-1.3% of share count a year) rather than diluting shareholders, and its net cash position is positive: in plain terms, it carries no debt burden.

Chipotle's moat: speed and customization

Chipotle's competitive advantage (its moat, what keeps a rival from taking its place) rests on an assembly-line model: the customer builds their bowl or burrito in seconds in front of the crew, with no kitchen wait. This format created its own category, Mexican "fast casual," that no one has managed to replicate at this scale. Chipotlanes, dedicated lanes for picking up digital orders without leaving the car, reinforce that execution speed further.

The price: more attractive than it looks

The stock trades at 34.2 times its annual free cash flow (P/FCF), a multiple that looks high at first glance: you're paying today for the equivalent of 34 years of that cash. But that number alone means nothing without weighing it against growth. My model, which projects future cash from the recent growth pace, puts a reasonable buy price around $52.52, against a current price of $36.63 (the stock underwent a 50-for-1 split in 2024, which is why the price looks low). In other words, despite a multiple that looks stretched, my model sees roughly a 43% discount: the market may not yet be fully pricing in the growth Chipotle has shown in recent years.

The real risk: will this growth continue?

That math rests entirely on one assumption: that Chipotle keeps growing its cash near the 26% pace seen recently. But 2025 marked a genuine slowdown: comparable restaurant sales cooled, and management, now led by CEO Scott Boatwright (in the role since late 2024), has even warned that 2026 looks roughly flat on that measure. The first quarter of 2026 offered some reassurance (revenue +7.4%, comparable sales +0.5%), driven mostly by new store openings rather than existing restaurants. A low buy price calculated on slowing growth should be taken with caution, not as a certainty.

Management's plan to restart the engine

Boatwright has deliberately tightened the menu rather than expanding it: no breakfast, no fish tacos, no desserts, despite recurring customer requests. Management prefers investing in execution (faster equipment across roughly 2,000 restaurants by the end of 2026) and digital, rather than novelty for its own sake. It's also testing $2.50 tacos to win back more price-sensitive customers, a segment Chipotle had somewhat lost sight of during its past price increases.

What to watch on July 29

Chipotle reports second-quarter results on July 29. The number to watch first: comparable sales, to see whether the first quarter's rebound holds or fades. A return to double-digit growth there would validate my model's assumption; another stall would call for revising the reasonable buy price downward.

• Chipotle passes all 10 of my quality criteria (perfect score), driven by 26.3% annual cash growth and a 20.2% return on capital
• The stock trades at 34.2 times annual cash flow, a multiple that looks high, but my model sees a 43% discount given recent growth
• The real risk: comparable sales slowed in 2025, and management expects a roughly flat 2026 on that measure
• Management is tightening the menu rather than expanding it, and testing lower prices ($2.50 tacos) to win back price-sensitive customers
• Q2 2026 earnings on July 29: whether Q1's comparable-sales rebound holds is the key signal

FAQ

Why does Chipotle get a perfect score despite a P/FCF of 34 times?

The quality score judges the business (profitability, growth, capital management), not the price. Chipotle passes all 10 criteria on that front. Price is judged separately, and relative to that growth, my model still finds it reasonable, not expensive in absolute terms.

Why is Chipotle stock only $36 when it used to trade much higher?

Chipotle carried out a 50-for-1 stock split in June 2024. The share count was multiplied by 50 and the price divided by 50 accordingly: the company's total value didn't change, only the price per share.

Is the comparable-sales slowdown a concern?

It's the point to watch closely. Recent cash growth partly rests on strong comparable sales from past years. A sustained slowdown would move Chipotle closer to an ordinary growth company, which would justify a lower buy price than the one calculated today.

Should you buy Chipotle stock before its July 29 earnings?

The quality of the business isn't in question. The price depends on your conviction that comparable sales will recover. This is not personalized investment advice, do your own research.

CMG: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).