Chipotle Mexican Grill Is Down 15% and Growing. Here's Why It Has the Makings of a Monster Stock for the Next Decade.

Stocks change as investors incorporate information. But sometimes, it's due to short-term factors.

The key is to distinguish between growth companies with bright long-term prospects and those whose business prospects have been permanently altered.

Chipotle Mexican Grill's (NYSE: CMG) share price has dropped 15.5% in 2026, through Oct. 29. During this time, the S&P 500 Growth index gained 12.1%. Here's why investors should view this as an opportunity to pick up Chipotle shares.

Turning around sales

There's no doubt that higher overall prices, including for basic items like energy and gas, have hurt consumer discretionary spending. That's squeezed people's wallets and caused them to eat out less. There have also been cost pressures affecting Chipotle Mexican Grill's profitability.

Still, management has taken steps to improve sales, particularly sluggish traffic, and profitability. Earlier this year, CEO Scott Boatwright announced his Recipe for Growth strategy, which includes five parts. This includes updating the menu to include more value and protein items.

Fortunately, the last two quarters have shown initial success. Chipotle's second-quarter same-store sales (comps) grew 2.2%. Importantly, higher customer traffic was a positive contributor for the second straight quarter, adding 1 percentage point for the period. An increase in spending, measured by the average check, made up the balance of the comps' growth. Management expects a low-single-digit percentage in the company's comps for this year.

Still, costs, including food, beverage, and packaging, along with labor, increased at a higher pace. That's why Chipotle's operating margin contracted 2.5 percentage points to 15.7%.

That's not too concerning to me since the company should recoup the costs over time with higher menu prices. That's particularly true since it has drawn customers, indicating people like its offerings.

Long-term expansion on track

In the meantime, Chipotle has plenty of expansion opportunities ahead. With sales moving in the right direction, that's encouraging.

The company had over 4,200 restaurants as of June 30. That's after opening 100 locations in June.

Management plans to add 350-370 restaurants this year. It's also expanding outside the United States, with that total including 10-15 international locations.

Better valuation

Chipotle's stock price drop has created a better valuation. The price-to-earnings (P/E) ratio has dropped from 35 to 30 this year.

To give that historical context, the shares have a five-year median P/E ratio of 51. The shares trade at a richer valuation than the S&P 500's P/E multiple of 26. However, with Chipotle's sales growing and the company expanding, paying a premium to the overall market seems warranted.

With a better valuation and the company moving in the right direction, Chipotle's stock represents a big money-making opportunity in which investors can benefit from growing earnings and an expanded P/E ratio.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short December 2026 $38 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.