Is Chipotle Mexican Grill, Inc. overvalued or undervalued?

As of 23 April 2025, the valuation grade for Chipotle Mexican Grill, Inc. has moved from expensive to very expensive, indicating a significant shift in its perceived value. The company is currently considered overvalued based on its financial metrics. Key ratios include a P/E ratio of 46, a Price to Book Value of 20.40, and an EV to EBITDA of 29.59, all of which are substantially higher than its peers. For instance, McDonald's Corp. has a P/E of 53.45 and an EV to EBITDA of 36.99, while Starbucks Corp. shows a P/E of 32.27 and an EV to EBITDA of 19.73.
In comparison to its peers, Chipotle's high valuation metrics suggest that investors are paying a premium for its growth potential, but this comes with increased risk. Notably, the company's return on equity (ROE) stands at an impressive 44.82%, indicating strong profitability, yet this does not sufficiently justify the elevated valuation levels. Recent stock performance shows that Chipotle has underperformed the S&P 500 over the past year, with a decline of 16.24% compared to the index's gain of 10.26%, reinforcing the notion that the stock may not be a prudent investment at its current price.