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But those who own or are considering purchasing stock in a company should make the effort. Doing it in a way that has some chance of being accurate requires developing an understanding of the business and making some assumptions, but you’ll find the effort worthwhile.
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Chipotle Mexican Grill (NYSE: CMG) has encountered some challenges this year. But where can we expect its stock price to be in five years?
Image source: Getty Images.
The business
Chipotle Mexican Grill serves Mexican-style food such as burritos, quesadillas, tacos, and salads. The fast-casual restaurant seeks to use fresh ingredients without artificial colors, flavors, or preservatives.
The company has had a lot of success, but results have been challenging recently. That’s because consumers have faced broadly higher prices for most of their purchases, and their paychecks haven’t kept up with inflation.
In the second quarter, Chipotle’s same-store sales increased 2.2%. While that was not great, it was an improvement from the first quarter’s 0.5% gain. Positively, in Q2, higher traffic contributed 1 percentage point to that growth. That shows people remain attracted to the restaurant.
The spending breakout shows how persistent inflation has weighed on consumers. Higher spending added 1.2 percentage points to the same-store sales gain. However, this was entirely due to Chipotle’s price increases (1.6 percentage points), and customers shifting to lower-priced items subtracted 0.4 percentage points from the final result.
Adding to the company’s woes, a…
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