In a turn of events this week, Chipotle Mexican Grill’s CMG CEO Brian Niccol announced he will be departing to take over the helms of Starbucks (SBUX). Investors may be wondering which one of these retail restaurant stocks is the better choice with Niccol’s set to takeover as CEO of Starbucks in September.
This is especially true given Chipotle’s stellar performance under Niccol’s with its stock soaring over +200% in the last five years compared to Starbucks -2%. However, past performance is not an indication of future success which further begs the question of which stock may be the better option for investors at the moment.
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Growth Comparison
Following a historic 50-1 stock split in June, Chipotle’s annual earnings are now expected to increase 20% in fiscal 2024 to $1.08 per share compared to EPS of 0.90 last year ($45 per share/50). Furthermore, 18% EPS growth is expected in FY25.
On the top line, Chipotle’s total sales are projected to rise 15% this year and expected to jump another 13% in FY25 to $12.79 billion.
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Pivoting to Starbucks, annual earnings are expected to be virtually flat in FY24 but projected to rise 11% in FY25 to $3.94 per share. Starbucks' total sales are slated to increase 1% in FY24 and are forecasted to expand another 6% next year to $38.84 billion.
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Valuation Comparison
While Chipotle’s growth may have the edge, Starbucks’ valuation is more attractive. In this regard, SBUX trades at 26.6X forward earnings which is near the S&P 500’s 23.3X. In contrast, CMG trades at a noticeable premium to the broader market at 49.7X.
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Balance Sheet Comparison
Financial health can certainly be a deciding factor when choosing between stocks, and although Starbucks has more cash on hand Chipotle has a stronger balance sheet.
To that point, Chipotle currently has $1.49 billion in cash & equivalents with $8.92 billion in total assets versus $5.2 billion in total liabilities.
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As for Starbucks, the company has $3.39 billion in cash & equivalents but $38.04 billion in total liabilities compared to $30.11 billion in total assets.
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Final Thoughts
Surely there is a turnaround needed in Starbucks' overall operational performance as insolvency has become an issue when looking at the company’s balance sheet.
However, under Brian Niccol’s leadership, there is hope that he can bring Starbucks to the same high-performing standards that he oversaw at Chipotle. For now, Starbucks and Chipotle's stock land a Zacks Rank #3 (Hold) as both are viable long-term investments considering their favorable outlook although there could be better buying opportunities ahead.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
