Tag Archives: pgld criteria

Chipotle Mexican Grill (CMG) Analysis & Valuation

Chipotle Mexican Grill (CMG) LogoI have been following Chipotle Mexican Grill (CMG) for quite some time now, and it didn’t come as a surprise to me that it scored very well in a recent stock screen I made for companies which exhibit high, predictable growth and little debt. Chipotle Mexican Grill’s EPS has grown at a compounded annual rate of 39% over the past five years. Sales have grown at 23% per year. As of Dec. 31, 2012, CMG was trading for $297.46 which translates to a market cap of $9.15 billion.

I will now review the latest annual and quarterly reports in detail to determine if there are any red flags which would preclude an investment in Chipotle. Following that, we will attempt to determine a reasonable estimate for CMG’s current intrinsic value and use that information to set an entry price target.

Detailed Analysis

CMG is an owner and operator of Mexican fast food restaurants which have a core menu consisting of burritos, tacos, and salads. The company does not franchise, and their claim to fame is their focus on high quality ingredients and training of their people. This has brought them a great deal of success thus far. Chipotle Mexican Grill’s most recent annual report was for fiscal year 2011 which ended on December 31, 2011. As that was now over a year ago, we will also pay close attention to the 3rd quarter report, which ended September 30. Following are the key takeaways from both reports.

2011 Annual Report Highlights

  • CMG places an emphasis on naturally raised meat and dairy and locally grown produce. The company believes that this increases the quality, taste, and integrity of its food. There is inadequate supply of naturally raised meat to commit to this goal fully however, and some regions occasionally revert to conventionally raised meat in these cases. This is a potential red flag due to the company’s very ambitious growth aspirations. Will CMG’s suppliers be able to keep up with demand?
  • The company is extremely focused on customer education and engagement. Programs include a web-based program called the Farm Team to educate customers about what makes CMG’s food unique, a Cultivate Festival which drew 17,000 people in Chicago, the production of a short film to expose customers to the benefits of sustainable farming, and finally the establishment of a non-profit organization to assist those who are making efforts in areas such as animal welfare and sustainable farming. Continue reading
Tagged , ,

Buffalo Wild Wings (BWLD) Analysis & Valuation

Buffalo wild wings logoBuffalo Wild Wings (BWLD) was one of the top performers in a recent stock screen for companies that exhibited steady, predictable, growth with little debt. As part of the value investing workflow we developed in an earlier article, a detailed analysis must now be conducted, followed by a determination of BWLD’s intrinsic value.

BWLD is a restaurant owner, operator, and franchisor operating primarily in the United States, with a few locations in Canada as well. Restaurants are themed as sports bars, but attempt to be equally friendly to both sports fans and families alike. They have managed to succeed in obtaining a dominant position with their brand, and the company’s restaurants are the destination of choice for Sunday football as well as other major events. The company was founded in 1982 and has been publicly traded since 2003.

Buffalo Wild Wings has enjoyed phenomenal and consistent growth over the past decade. EPS has grown at a compounded annual rate of 24% over the past five years with sales growing only slightly lower at 23% / year. As of today, BWLD was trading for $71.94 which translates to a market cap of $1.34 billion. The company meets all of the other PGLD criteria as well, and boasts zero long term debt. Let’s look a bit deeper at the latest quarterly and annual reports to get a better picture. Continue reading

Tagged , ,

Bio-Reference Laboratories Analysis & Valuation

BRLI logoBio-Reference Laboratories (BRLI) was ranked tier 1 in a recent stock screen for companies that exhibited steady, predictable, growth with little debt. As part of the value investing workflow we developed in an earlier article, a detailed analysis must now be conducted, followed by a determination of BRLI’s intrinsic value.

Bio-Reference Laboratories is a company which provides clinical testing services to customers primarily in the Northeastern United States. The customer base includes physician offices, clinics, hospitals, employers and the government, and it is the fourth-largest testing services provider in the country. In addition to standard tests, Bio-Reference Laboratories has great expertise in cancer pathology through its GenPath unit. Also of note is the GeneDx genetics laboratory, which is a leading provider in the diagnosis of rare genetic diseases. Continue reading

Tagged , ,

Rue21, Inc. Analysis and Valuation

Rue21, Inc. Analysis and ValuationRue21, Inc. (RUE) was one of the stocks ranked tier 1 in a recent stock screen. The screen attempted to identify stocks that would exhibit predictable growth and that carry little to no debt. Rue21 satisfied all of the identified criteria and now we are tasked with investigating the company further in an attempt to identify any red flags that would preclude our inclusion of this company in a value investment portfolio. These are all steps of the value investing workflow we developed in an earlier article.

Rue21, Inc. is a clothing retailer targeted at teens, with stores across most of the United States. Stores are located primarily in small towns where there is less competition, yet the company offers very fashionable clothing items and changes themes frequently to keep “fresh”. We will now examine the company in detail and seek to determine an intrinsic value, margin of safety, and target entry price range. Continue reading

Tagged , ,

Stock Screen for Predictable Growth & Low Debt

Stock Screen for Predictable Growth & Low DebtIn the previous article we developed a value investing stock selection criteria based on companies that exhibit predictable growth in earnings, sales, and equity, and have low or no debt. This is called the PGLD criteria and we will now use a stock screener to see what stocks are able to meet it.

We will use the Finviz stock screener for this exercise, as it’s free and offers the ability to screen against virtually any fundamental, technical, or descriptive criteria possible. The only exception is BVPS growth which we will have to handle manually or with another tool. Continue reading

Tagged , , , ,

Stock Selection Criteria: Predictable Growth & Low Debt

Question mark in spray paint

Defining a suitable stock selection criteria is step #1 in our value investing workflow. It’s critical that we select only those stocks that will allow us to calculate a valuation with an accuracy we’re sufficiently confident in to enable proper execution of our value investment strategy.

Selected stocks firstly must be highly predictable. A highly predictable company will allow us to determine an intrinsic value with a high degree of confidence.

Secondly, we are looking for high quality stocks. Quality ties in closely with predictability and is defined by the company’s ability to meet a number of criteria with respect to consistent growth and return on capital. This stock selection criteria will seek to choose only the highest quality companies with a stellar record of consistently high growth across a number of metrics.

Finally, we will seek to limit our selection only to those sectors and industries within which we have at least a cursory understanding of the business. This will allow us to further screen our stock selection against possible red flags or opportunities that may not be present in the numbers themselves. Continue reading

Tagged , , ,