Chipotle Mexican Grill (NYSE: CMG ) is a favorite of mine when it comes to
lunch options. But CMG also is a favorite of mine when it comes to talking about
stocks that are ready to flop. This company simply can't keep up its breakneck
growth and when you look at the performance of other restaurant stocks, it is
overdue to hit that inevitable wall that comes when a fad chain overextends
itself. Chipotle assuredly is a hot dish, but expect this stock to cool to room
temperature very soon. Here's why: The Ghosts of Restaurant Stocks Past : Wall
Street is littered with the wreckage of hot restaurants that grow and expand,
delivering a quick double or triple to shareholders, only to watch the bottom
fall out. Consider Krispy Kreme (NYSE: KKD ) from around $10 after its IPO in
2000 to almost $50 in 2003. It seemed like the cult donut shop would never come
down. But by the end of 2004, it was again approaching $10 and is now around $7
a share. InvestorPlace.com contributor Lawrence Meyers does a great job showing
these flops visually with charts of Cheesecake Factory (NASDAQ: CAKE ) and P.F.
Chang's China Bistro (NASDAQ: PFCB ) in his own bearish take on CMG . The fact
is you can only build so many stores so quickly to prop up growth. Eventually
the market becomes saturated or the rate of expansion is no longer large enough
to materially impact earnings and sales growth. Inflation Squeezing Margins: On
the margins front, almost every ingredient the company uses is suffering from
rampant inflation . Chipotle announced this summer it will be hiking prices to
offset this trend its first increase in menu prices since the recession but it
remains to be seen if that will be enough. Food prices comprise more than
one-third of overall costs , meaning this is perhaps the biggest bottom-line
issue for the company. Shares Outrunning Earnings : I'll admit Chipotle's
revenues are impressive, up 21% in the past year to $2 billion. Its net income
is up at an ever faster clip,
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