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Fast-Food Favorite? Chipotle
09/25/2014 8:00 am EST
Fast-food is a $191 billion industry in America. 44% of Americans eat at a fast-food restaurant at least once a week, notes Chris Preston in Daily Profit.
Like it or not, fast food is big business. More importantly, it's a growing business. To get a piece of that growth, it's not a bad idea to own a fast-food stock in your portfolio.
McDonald's (MCD) has long been the popular fast-food choice of most investors; It's the largest fast-food chain in the world, with $27.6 billion in global sales in 2013.
But McDonald's greatest period of growth is clearly behind it. Analysts are actually expecting a decline in earnings per share this year.
Burger King (BKW), McDonald's biggest rival, isn't the answer, either. The company has far more debt than cash, declining sales, and has a reputation for being "a plaything for financiers."
Wendy's (WEN) has many of the same problems as Burger King, with revenues declining 19.5% last quarter and its debt outpacing its cash by nearly four to one.
Which brings me to Chipotle Mexican Grill (CMG), which recently opened in a strip shopping center near my home and has had lines since day one.
No fast-food stock has a better combination of earnings growth (25.5% year over year, with another 27.5% increase expected in 2015) and revenue growth (28.6%). It's the only major fast-food company with zero debt, not to mention $804 million in cash.
Chipotle doesn't pay a dividend and its share price is enough to send sticker shock up your spine, which hopefully means that a stock split is imminent.
But at a time when sales at most of the other big-name fast-food companies are either stagnating or backtracking, Chipotle's are steadily growing.
Even after rising 53.5% in the last year, Chipotle stock looks like a good long-term investment. In an increasingly crowded fast-food landscape, Chipotle continues to find ways to stand out.
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