Shareholders of Chipotle would probably like to forget the past six months even happened. The stock dropped 26.7% and now trades at $40.21. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Following the pullback, is now a good time to buy CMG? Find out in our full research report, it’s free.

Why Is CMG a Good Business?

Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.

1. New Restaurants Opening at Breakneck Speed

A restaurant chain’s total number of dining locations often determines how much revenue it can generate.

Chipotle operated 3,916 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 8.3% annual growth, much faster than the broader restaurant sector.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

2. Surging Same-Store Sales Show Increasing Demand

Same-store sales is an industry measure of whether revenue is growing at existing restaurants, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Chipotle’s demand has been spectacular for a restaurant chain over the last two years. On average, the company has increased its same-store sales by an impressive 4.2% per year.

3. Economies of Scale Give It Negotiating Leverage with Suppliers

With $11.79 billion in revenue over the past 12 months, Chipotle is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost.

Final Judgment

These are just a few reasons why we think Chipotle is a great business. With the recent decline, the stock trades at 34.5× forward P/E (or $40.21 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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