Chipotle Mexican Grill's (NYSE:CMG) investors will be pleased with their fantastic 363% return over the last five years

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Chipotle Mexican Grill, Inc. (NYSE:CMG) share price. It's 363% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 19% in about a quarter.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Chipotle Mexican Grill

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Chipotle Mexican Grill managed to grow its earnings per share at 45% a year. This EPS growth is higher than the 36% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 66.49, the market remains optimistic.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's nice to see that Chipotle Mexican Grill shareholders have received a total shareholder return of 52% over the last year. That's better than the annualised return of 36% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Chipotle Mexican Grill better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Chipotle Mexican Grill you should know about.

Chipotle Mexican Grill is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.