They are two of the most iconic businesses in America. Chipotle (CMG), the fast-casual Mexican restaurant chain that makes your burrito, bowl and taco orders right in front of you, is the upstart, having surged past the likes of Burger King, Domino’s Pizza (DPZ) and Subway in recent years. And McDonald’s (MCD), of course, needs no introduction, having occupied the fast-food throne for longer than Queen Elizabeth.
But lately, no one seems interested in buying either stock.
MCD stock has fallen 20% from its late-February apex; CMG shares peaked more than two years ago, in April 2024, and have fallen 25% in the last year.
Why the lack of enthusiasm? Both fast-food giants are still growing just fine, if not at the same clip they were just after the pandemic.
CMG vs. MCD: Tale of the Tape
Chipotle churned out a record $11.94 billion in revenue last year, a 5.5% improvement over 2024, and sales are expected to pick up this year, topping $13 billion for a 9.2% increase.
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McDonald’s, of course, has much higher sales numbers, tallying a record $26.88 billion last year. However, as the more established company, it is no longer growing at the same clip as Chipotle, with 3.9% revenue growth last year and a 4.9% pickup in sales expected this year.
Accelerating sales at both restaurants is a good trend. But still, investors don’t seem to be having it. Perhaps that’s because neither fast-food stock is exactly a bargain by traditional value investing standards. MCD stock trades at 21x forward earnings estimates and a whopping 7x sales even after its recent haircut. CMG is even more expensive on a forward P/E basis, trading at 27.9x; it also trades at 3.4x sales and an astronomical 18.5x value.
So, if they’re not value stocks and they’re no longer the go-go growth stocks they once were … what are MCD and CMG? And are either of them worth buying low on, despite the still-lofty valuations?
I say not really. If I had to take a flyer on either, I’d probably go with CMG, since it’s much earlier in its life cycle and therefore likely has more room to grow (though MCD at least pays – and grows – a dividend). But in reality, I’d avoid both.
BROS: A Better Alternative
Instead, I’d put my hard-earned money toward a different kind of food-and-beverage stock: Dutch Bros (BROS).
Actually, many Dutch Bros locations currently only offer beverages, both hot and cold. It’s known primarily as a drive-through coffee store chain, but it’s been branching into cold drinks like lemonades, iced teas, smoothies, sparkling sodas and something called the Dutch Bros Rebel Energy Drink; the company plans to expand its food offerings in the near future, and it just announced the acquisition of 65 recently closed Salad and Go locations.
And it’s growing like a weed: 27% revenue growth and 87% EPS growth last year, with another 30% sales growth and 29% earnings growth expected this year. It’s opening more than 150 new locations per year, with 185 openings slated for 2026; it’s currently up to 1,266 stores in 27 states, with the ambitious goal of eventually opening 5,000 locations.
Rapid expansion, accelerating revenues, ambitious goals – those are characteristics that used to describe both McDonald’s and Chipotle in their glory years. And while BROS carries a lofty valuation that typically comes with the territory of a fast-growing company in the midst of its world-conquering phase (51x forward earnings, 3.5x sales), both the top- and bottom-line growth validate the frothy valuations. And after pulling back sharply on the heels of another impressive earnings report last week (32% sales growth, 46% EPS growth, 44 new locations opened), this could be a decent entry point.
Don’t get me wrong: consumers are still “Lovin’ It” at McDonald’s and dig Chipotle’s “Food with Integrity” motto. But investors prefer Dutch Bros.
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