Chipotle Mexican Grill (CMG)
This morning created an opportunity to actually SEE what they mean when the talking heads on TV discuss a stock that is "priced for perfection".... in other words -- the company better continue to execute everything perfectly because their stock price is priced that way.
Chipotle Mexican Grill (CMG) slightly missed the earnings estimates (they are - after all - just estimates... but) and they are down 90+ points as I type this. This is where the P/E matters... the "price to earnings" ratio. The P/E on CMG was up in the 40's... where as a normal P/E might be closer to 15. I don't use the P/E much -- but this IS when it matters... because they have to grow into the large P/E and if that growth stumbles - then that P/E ratio is going to have to come down... which means the stock price is going to have to come down.
Their growth is still on fire - they earned far more than estimated BUT the sales estimate was 707MM and they "only" hit 690MM...
This is why I don't invest in these kinds of companies.... I love watching the stocks climb -- maybe even love the company -- but when they're "priced to perfection" you can get absolutely hammered in a nanosecond! To me - they're not worth the risk.
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