Yahoo Finance All You Need To Know About Chipotle Mexican Grill Inc’s (NYSE:CMG) Financial Health
With a market capitalization of US$12.1b, Chipotle Mexican Grill Inc (NYSE:CMG) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high market liquidity, which means there’s plenty of stocks available to the public for trading. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Using the most recent data for CMG, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
Check out our latest analysis for Chipotle Mexican Grill
Can CMG service its debt comfortably?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. For CMG, the debt-to-equity ratio is zero, meaning that the company has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with CMG, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can CMG pay its short-term liabilities?
Since Chipotle Mexican Grill doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. Looking at CMG’s most recent US$355m liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$721m, leading to a 2.03x current account ratio. For Hospitality companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Next Steps:
CMG has zero debt as well as ample cash to cover its near-term liabilities. Its strong balance sheet reduces risk for the company and shareholders. This is only a rough assessment of financial health, and I’m sure CMG has company-specific issues impacting its capital structure decisions. You should continue to research Chipotle Mexican Grill to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CMG’s future growth? Take a look at our free research report of analyst consensus for CMG’s outlook.
Valuation: What is CMG worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CMG is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
