Chipotle Mexican Grill, Inc.
Although Q3 revenue was down 15 percent compared to Q3 2015, Chipotle notched its second consecutive quarter-over-quarter revenue gain.
Up to this point, the reputational damage the stock has endured has trumped any modest fundamental recovery that the company has achieved. The chart below paints a clear picture of how revenue has bounced back in the past two quarters but Chipotle’s stock continues to fall.
Value investors use hundreds of metrics like earnings, revenue growth, book value and free cash flow to try to determine how much a stock is “worth.” However, at the end of the day, a stock’s value is only what investors are willing to pay for it.
When investors lose trust in a company like Chipotle, improving fundamentals may not be good enough to convince them to buy back in.
Trust and reputation are critical for stocks. Just look at the single-digit PE ratios of Delta Air Lines, Inc.
However, Tesla Motors Inc
“Brand is just a perception, and perception will match reality over time,” Musk
If Chipotle keeps its business on the right track, Musk believes its reputation will eventually follow. Unfortunately for investors, it may take
Image Credit: By Miosotis Jade (Own work) [CC BY-SA 4.0 ], via
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