Here's My Top Growth Stock to Buy Now

There are some restaurant concepts that just click with consumers, and those businesses can turn into long-term growth machines. This has been the case for Chipotle Mexican Grill (CMG 1.38%).

Despite pioneering the now ubiquitous fast-casual restaurant category and delivering incredible returns to investors since 2006, the growth of this burrito chain is nowhere near over if management’s plans are any indication. That, however, is only half the reason why I think this stock still has plenty of growth ahead of it.

What a concept

Chipotle only sells a handful of products, including includes tacos, burritos, and bowls. The trick to the company’s success has been its choose-your-own-adventure ordering, where customers walk down an assembly line and pick out each freshly made ingredient. It is, thus, highly customized food that is both reasonably priced and quickly served.

A person eating a burrito in a restaurant.

Image source: Getty Images.

Customers love it, and that’s really the big story here. Despite the fact Chipotle has been raising prices to offset inflation, the company’s 2022 third-quarter same-store sales rose 7.6%. Perhaps even more impressively, store-level operating margins improved 180 basis points year over year. New store openings, meanwhile, helped to push overall sales up 13.7% for the quarter. 

If this is the performance this restaurant chain puts up in a tough environment, imagine what it will do when operating conditions improve. 

Bigger and bigger

Having a loyal customer base that includes over 28 million members in its loyalty program is essential, but Chipotle’s long-term outlook really starts to get exciting when you consider the company only has around 3,100 restaurants. Management’s goal is to expand that number to 7,000. That means the company wants to more than double in size with a goal for 2023 of opening between 255 and 285 new locations. It expects to be roughly at the low end of that range when the final tally comes in for 2022, so this is not an unrealistic goal. At the current rate, it would take over a decade for the company to hit its long-term target.

In other words, Chipotle could deliver another 10 or so years of strong growth before it shifts gears. Most growth investors should find that kind of opportunity and timeline to be an appealing proposition. But here’s an interesting fact: The stock has pulled back around 20% from the all-time high it reached in 2021. There have been deeper drawdowns in the past, but Chipotle is larger than it was back then, now producing trailing-12-month revenue of $8.4 billion.

CMG Chart

Data by YCharts.

A 50%-plus decline, as Chipotle stock has experienced before, would be a huge buying opportunity. Yet given the increasing scale of the company and its proven longevity, you shouldn’t bank of seeing another drop like that again. Instead, growth investors with a long-term perspective should see the 20% decline as an opportunity. Maybe there’s the possibility of more near-term pain if the bear market continues to head lower, but if you sit back and wait for the perfect entry point, you may end up missing out entirely should markets rebound sooner than you expect.

Don’t be afraid

There’s a popular Warren Buffett quote that says you should be greedy (buy stocks) when others are fearful. That fear has punished broad swathes of the market in the past year, taking down great companies in the process. Chipotle is one of those companies with strong fundamentals and exciting long-term growth prospects. This growth stock is unlikely to stay down for long if history is any guide.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.