With interest rates rising, banking sector having a crisis, S&P500 down 9% from all time high, war happenings and global economic slowdown, im sure all investors are wondering the same question- Is there any safe growth stocks to park their money into?
In unstable times like this, Its important to go back to the basics and park your money is defensive stocks. Defensive stocks are any stocks within the utilities, consumer staples, healthcare etc. This is because defensive stocks are essential to human lifes and they typically maintain their income stream despite the overall stability even when the market is volatile.
Lets take a look at $Chipotle Mexican Grill(CMG)$ . Chipotle is an American chain of fast casual restaurant specializing in bowls, Tacos, Burritos. They operate restaurants in the US, UK, Canada, Germany and France. They operate 3182 stores worlwide and they continue to expand. This company has existed since 1993 and has grown into a USD 48B giant company now.
Lets take a look at some key factors:
-Revenue has grown at a CAGR Rate of 14.15% from 3.9B in 2016 to 8.63B in 2022
-Net Income has grown at CAGR Rate of 84% from 23M in 2016 to 899M in 2022
-Balance sheet is strong with 899.14M of cash and equivalents. Receivables are low as this company is a fast food company that takes payments the moment goods are delivered.
-Total Debt is 3.73B while Total Asset is 7.99B
-Company has produced Free Cash Flow of 1.05B in 2022. The beauty of this company is that they do not pay dividend, but they rather take their FCF to reinvest into opening more stores. This allows them to grow without having to take up additional debt. Free Cash flow has grown at a CAGR rate of 49.4% for the past 6 years.
-Chipotle has also been buying back shares by 0.98% a year. With more spendings on buybacks, Chipotle EPS will continue to increase over the next few years.
-Chipotle is a very young company compared to $McDonald's(MCD)$ . McD has 40031 locations worldwide while Chipotle has 3182 stores only. This gives Chipotle so much room for growth in the fast food sector.
-Based on 2022 FCF of 1.05B, a conservative growth rate of 30% for the next 10 years, with a discount rate of 10% and a Terminal PE of 15, Chipotle is valued at USD 123.9 Billion. With Current market cap of 48B, Chipotle is undervalued by 60% .
With that being said, I believe now it is a very good time to purchase Chipotle stock. If you have invested $1000 in $Domino's Pizza(DPZ)$ in 2010, $33200, 33x your investment amount. I believe chipotle is also such a stock that will give you a multi-bagger return. What do you think? Let me know in the comment box!
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