By:

FINC 800
Professor Ying
Becker

Haitham Alghamdi
Wahida Brithbi
Ahmad Gesa
Dung Nguyen

Company
Background
Overview
Seven locations in Canada, six in England,
three in France, and one in Germany.

Overview

The company was founded in 1993 by Steve

Ells
On IPO date, Chipotle issues 7.88 million
shares
Subsequently sold 4.2 million shares in a
secondary offering $61.50

Food with integrity

Quality ingredients
40% of their beans are
organically grown
100% of all the meats
from naturally raised
animals
Fast-casual restaurant
Healthy food
Affordable price.

SWOT ANALYSIS
Strength
High quality and healthy food

Weakness
Not fully expanded in the U.S.

All restaurant are under the ownership of

the company, no franchise easily to
maintain quality benchmark

High price of food product compare to

competitor

Naturally raised chicken and pork

No debt

Offer limited menu to the customers

High dependency on verbal
communication, customize meal

Strong relation with suppliers

Pay high to employees as compared to
managers
Opportunities
Eco-friendly trend in design
Increase number of restaurant in US and
Canada and expand more globally
Increase more food selection

Threats
Strong directs competitors: Qdoba, Taco
Bell
Indirect competition from McDonald,
Starbuck, Yum! Brand
Competitors cost of food are lower than
Chipotle
Economic slowdown

Restaurant Industry

The Current Operating Environment

Building A Digital Presence

Major competitors
9,000,000,000

350,000,000

8,000,000,000

300,000,000

7,000,000,000
6,000,000,000
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
0

250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
-50,000,000

Revenues
Net Income

Asset Utilization
Asset Management
2013
Total Asset Turnover
Receivables Turnover
Inventory Turnover
Property Plant & Equip
Turnover
Days Inventory
Cash Conversion Cycle

CMG

MCD

YUM

DRI

1.75
157.5
2
195.5
1
3.51

0.78
20.86

1.48
42.21

140.2

31.83

1.33
109.0
8
17.51

1.11

2.05

1.87
-4.92

2.6
-3.53

11.47 20.85
-29.93 8.93

Profitability Analysis
Profitability Ratios
2013
Sales (Mil)

CMG

MCD

YUM

DRI

3215

28106

13084

8552

ROA % (Net)
ROE % (Net)
ROI % (Operating)

17.81
23.52
38.7

15.51
35.69
20.12

12.32
50.51
24.9

6.4
21.12
11.72

Profitability Analysis
2.00

30.00%

1.80
25.00%

1.60
1.40

20.00%

1.20

Equity Mulitplier

1.00

15.00%

Total Asset Turnover

Profit Margin

0.80

ROE %
10.00%

0.60
0.40

5.00%

0.20
0.00
2009

2010

2011

2012

0.00%
2013

DUPONT DISAGGREGATION
ANALYSIS
Yea
r
200
9
201
0
201
1
201
2
201
3

Equity
Mulitplier

Profit
Margin

1.37

8.35%

1.38

9.75%

1.37

9.47%

1.35

10.18%

1.32

10.19%

Total Asset RO
Turnover E %
19.4
1.70
1%
23.7
1.76
3%
23.1
1.78
4%
24.2
1.76
0%
23.5
1.75
5%

ROA%
14.20%
17.16%
16.86%
17.91%
17.83%

LIQUIDITY AND SOLVENCY

ANALYSIS

Financial Ratios
Liquidity Ratios

12/31/2013

12/31/2012

12/31/2011

12/31/2010

12/31/2009

Quick Ratio

3.02

2.62

2.95

2.89

2.69

Current Ratio

3.34

2.93

3.18

3.3

2.91

LIQUIDITY AND SOLVENCY

ANALYSIS
4
3.5
3
2.5
2
1.5
1
0.5
0

Current ratio
Quick ratio

COMPANY VALUATION
#

Company
name
1 YUM

Ticker
YUM

2 Burger King

BKW

3 Cosi

COSI

4 Darden
Restaurant
5 Jack in the box

DRI

6 Panera Bread

PNI

JACK

7 Popeyes

PLKI

8 McDonalds

MCD

Average

Bet
a
0.97
0
0.88
9
1.42
7
0.77
4
0.55
8
0.57
8
0.67
7
0.47
9
0.86

WACC
Risk free rate

2.18%

Estimated market risk

premium
Beta

7.50%
0.866

D/V

E/V

Tax rate

40.00%

Cost of debt

0.00%

(1-t)*Cost of debt

0.00%

Cost of equity

8.67%

WACC

8.67%

COMPANY VALUATION
Net Working
Capital
Total Non -cash
Current Assets
% sales
Total Current
Liabilities
% sales
Net Working
Capital

Gross Assets
Accummulated
Depr
NFA
% of Sales
Depreciation
% of NFA

2013

2014

2015

2016

2017

2018

2019

Horizon

343,104

307,524.47

389,358.76

502,476.30

536,024.56

8.29%
247,847.68

8.29%
376,104.88

8.29%
404,968.06

8.29%
432,006.10

6.20%
$
143,876.00
4.48%

6.68%
59,676.79

6.68%
75,557.17

428,835.9
9
8.29%
345,618.0
5
6.68%
83,217.94

466,663.44

10.67%
199,228

348,718.8
4
8.29%
281,048.0
6
6.68%
67,670.78

6.68%
90,558.56

6.68%
97,508.24

6.68%
104,018.46

1.61%

1.61%

1.61%

1.61%

1.61%

1.61%

1.61%

1,490,635

1,941,272.3
3
653,318.38

2,256,589.
06
796,107.5
3
1,460,481.
53

2,586,224.
41
955,537.42

2,927,154.
90
1,131,131.
96
1,796,022.
94

3,276,665.
07
1,322,215.
63
1,954,449.
44

3,632,402.0
4
1,527,963.5
2
2,104,438.5
2

3,992,391.5
0
1,747,448.3
4
2,244,943.1
6

142,789.1
5

159,429.89

175,594.5
4

191,083.67

205,747.89

219,484.82

527,397
963,238

1,287,953.9
5

8.29%
313,801.59

1,630,686.
99

34.72%
96,054
9.78%

125,921.38

COMPANY VALUATION
(in million)

Sales
% growth
Total costs
% sales

EBITDA
% margin

Forecast period

2014
2015
2016
2017
2018
2019
2020
3,726,612.1 4,260,830.62 4,810,550.55 5,369,129.41 5,930,224.02 6,487,982.05 6,877,260.97
6
15.93%
14.34%
12.90%
11.61%
10.45%
9.41%
6.00%
2,748,376.4 3,142,362.59 3,547,781.03 3,959,732.94 4,373,540.21 4,784,886.76 5,071,979.97
7
73.75%
73.75%
73.75%
73.75%
73.75%
73.75%
73.75%

978,236
26.25%

1,118,468
26.25%

1,262,770
26.25%

1,409,396
26.25%

1,556,684
26.25%

1,703,095
26.25%

1,805,281
26.25%

Depreciation
Amortization:
% NFA

126,500.74

144,634.91

163,295.28

182,256.37

201,302.86

220,236.09

233,450.26

EBIT

$851,734.9
6

$973,833.13

Taxes (38%)
Profit After tax
OCF
CapEx
Increase/Decrease in
NWC

323,659.28
528,075.67
654,576.41
457,142.48
-83,924.65

370,056.59
603,776.54
748,411.45
330,115.56
8,594.17

417,800.21
681,674.03
844,969.31
354,158.04
8,843.54

466,313.24
760,826.86
943,083.23
376,194.96
8,986.06

Unlevered Free Cash

281,358.58

409,701.73

481,967.73

557,902.22

$1,099,474.2 $1,227,140.1 $1,355,380.9 $1,482,859.2 $1,571,830.7

4
0
4
0
5

515,044.76
563,486.49
597,295.68
840,336.18
919,372.70
974,535.06
1,041,639.05 1,139,608.79 1,207,985.32
396,114.91
413,889.68
368,607.90
9,026.53
8,972.85
6,262.47

636,497.60

716,746.26

833,114.95

COMPANY VALUATION
Output
Enterprise value
Present value of Free Cash
Flow

Terminal Value
Discount Factor
Present Value of Terminal
Value

Enterprise value
Outstanding shares
Implied share price
Current share price
Percentage overprice

2,149,249,00
0

31,202,807,0
00
0.61
18,946,791,0
00

21,096,040,0
00
31,015,621
680.17
660.55
2.97%

RECOMMENDATION
Short-Term Buy, Long-Term Hold
Current Price: $660.55, Project share
price:680.17
Stable revenue growth in the recent 5 years.
The number of restaurants will still be rising fast
for the next few years
Recognize revenue when food and beverage
products are sold.
Chipotles capital structure, currently, is 100%
equity. Chipotle has a large cash balance and a
strong anticipated operational cash stream in the
future

THANK YOU