Chipotle Mexican Grill (CMG)

Stock Recommendation

Tracy BrittSWS Co-Founder

smartwomansecurities

© 2006 Smart Woman Securities. All materials are for SWS

members’ use only

march 17, 2007

Chipotle (CMG)

The Story• Started in 1993• Subsidiary of MCD• IPO in January 2006• Food with integrity• Transforming casual

dining

The People

• CEO – Steve Ells• Low turnover

relative to industry

• Rivalry: Qdoba, Other Casual Dining• Barriers to Entry: Capital, Concept,

Failure• Substitutes: Very Easy to Substitute• Supplier Power: Not Relevant• Buyer Power: Becoming Stronger,

Use of Organic Market, Expansion of All-Natural and Organic

Porter’s Five Forces

• IPO in January 2006 at $22– Doubled in one day to $45

• Currently trading at $41• 52 week high/low: $49/$22• Short term expected target to remain

in the $35-$45, but expect long term to rise to $55

Technical Analysis

Fundamental Analysis

Company EPS Growth % P/E

Cheesecake Factory Inc 20.0 24.8

Starbucks Corp 19.7 41.1

P.F. Chang's China Bistro Inc 18.9 27.7

Brinker International Inc 18.6 16.3

Chipotle Mexican Grill Inc 18.5 38.0

Wendy's International Inc 15.4 22.4

Outback Steakhouse Inc 11.7 19.3

Yum! Brands Inc 10.6 15.7

Darden Restaurants Inc 10.3 17.4

McDonald's Corp 9.6 14.4

• $470.7 million of sales in 2004 and we sales rose more than 29%, to over $610 million, in 2005

• No long term debt• Current ratio of 3.8

Revenue Growth

Average Store Sales

Store Growth

Same Store Sales Growth

Investment Risks

• Transition from MCD• Margin Issues• Changing Trends• Health Concerns• Organic/Natural Products, i.e. Input

Costs

Investment Opportunities

• Strength of Concept• Market Readiness for “Food with

Integrity”• Growth of Casual Dining• Demonstrated Growth of CMG• Market Response to IPO• Financial Metrics and Growth Going

Forward

Investment Recommendation

• Despite the current valuation of the stock, we believe that CMG will excel in the coming years in response to the growing casual dining segment and an emphasis on natural eating. We rate the stock as a BUY at market price and recommend that Smart Woman Securities invest in the entity.

Q&A