Chipotle Mexican Grill Earnings Perspective: Return On Invested Capital

According to Benzinga Pro, during Q1, Chipotle Mexican Grill CMG earned $291.64 million, a 30.36% increase from the preceding quarter. Chipotle Mexican Grill also posted a total of $2.37 billion in sales, a 8.62% increase since Q4. Chipotle Mexican Grill earned $223.73 million, and sales totaled $2.18 billion in Q4.

Why Is ROIC Significant?

Return on Invested Capital is a measure of yearly pre-tax profit relative to capital invested by a business. Changes in earnings and sales indicate shifts in a company's ROIC. A higher ROIC is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROIC suggests the opposite. In Q1, Chipotle Mexican Grill posted an ROIC of 15.15%.

Keep in mind, while ROIC is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or sales in the near future.

ROIC is a powerful metric for comparing the effectiveness of capital allocation for similar companies. A relatively high ROIC shows Chipotle Mexican Grill is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of invested capital, some of that money can be reinvested in more capital which will generally lead to higher returns and, ultimately, earnings per share (EPS) growth.

For Chipotle Mexican Grill, the positive return on invested capital ratio of 15.15% suggests that management is allocating their capital effectively. Effective capital allocation is a positive indicator that a company will achieve more durable success and favorable long-term returns.

Analyst Predictions

Chipotle Mexican Grill reported Q1 earnings per share at $10.5/share, which beat analyst predictions of $8.92/share.

This article was generated by Benzinga's automated content engine and reviewed by an editor.