Chipotle Mexican Grill (CMG, Financial) witnessed a surge in its stock price following the announcement of a 50-for-1 stock split by the company's board. The premarket trading on Wednesday saw the shares climbing approximately 6%, reaching around $2,950.
The decision for a stock split aims to make the shares more affordable for individual investors without altering the company's overall valuation. Pending approval at the annual meeting on June 6, shareholders will be granted 49 additional shares for each share they hold.
With a closing price of $2,797.56 on Tuesday, Chipotle's stock is among the highest per-share values in the S&P 500 index, boasting a market valuation of $76.71 billion. This marks the first stock split in the company's 30-year history. Chipotle's CFO, Jack Hartung, highlighted that the move is intended to broaden the investor base, including employees and a wider range of investors.
Following the split, the stock is projected to trade at around $56 per share, given the current outstanding shares of approximately 27.4 million. Analyst Jim Sanderson from Northcoast Research commented that the split should improve stock liquidity, considering the significant rise in share price over recent years. Despite the change, the business's economic fundamentals remain strong.
Chipotle's forward price-to-earnings (P/E) ratio stands at 49.72, which is considerably higher than its industry counterparts like Starbucks and McDonald's, with P/E ratios of 20.89 and 22.24, respectively.
