Stock Analysis on Net

Chipotle Mexican Grill Inc. (NYSE:CMG)

Capital Asset Pricing Model (CAPM)

Microsoft Excel

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Chipotle Mexican Grill Inc. common stock.


Rates of Return

Chipotle Mexican Grill Inc., monthly rates of return

Microsoft Excel
Chipotle Mexican Grill Inc. (CMG) Standard & Poor’s 500 (S&P 500)
t Date PriceCMG,t1 DividendCMG,t1 RCMG,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2019 $10.59 2,704.10
1. Feb 28, 2019 $12.15 14.73% 2,784.49 2.97%
2. Mar 31, 2019 $14.21 16.95% 2,834.40 1.79%
3. Apr 30, 2019 $13.76 -3.17% 2,945.83 3.93%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2023 $44.05 13.41% 4,567.80 8.92%
59. Dec 31, 2023 $45.74 3.84% 4,769.83 4.42%
Average (R): 2.98% 1.11%
Standard deviation: 10.06% 5.31%
Chipotle Mexican Grill Inc. (CMG) Standard & Poor’s 500 (S&P 500)
t Date PriceCMG,t1 DividendCMG,t1 RCMG,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2019 $10.59 2,704.10
1. Feb 28, 2019 $12.15 14.73% 2,784.49 2.97%
2. Mar 31, 2019 $14.21 16.95% 2,834.40 1.79%
3. Apr 30, 2019 $13.76 -3.17% 2,945.83 3.93%
4. May 31, 2019 $13.20 -4.07% 2,752.06 -6.58%
5. Jun 30, 2019 $14.66 11.06% 2,941.76 6.89%
6. Jul 31, 2019 $15.91 8.53% 2,980.38 1.31%
7. Aug 31, 2019 $16.77 5.41% 2,926.46 -1.81%
8. Sep 30, 2019 $16.81 0.24% 2,976.74 1.72%
9. Oct 31, 2019 $15.56 -7.44% 3,037.56 2.04%
10. Nov 30, 2019 $16.28 4.63% 3,140.98 3.40%
11. Dec 31, 2019 $16.74 2.83% 3,230.78 2.86%
12. Jan 31, 2020 $17.34 3.58% 3,225.52 -0.16%
13. Feb 29, 2020 $15.47 -10.78% 2,954.22 -8.41%
14. Mar 31, 2020 $13.09 -15.38% 2,584.59 -12.51%
15. Apr 30, 2020 $17.57 34.22% 2,912.43 12.68%
16. May 31, 2020 $20.08 14.29% 3,044.31 4.53%
17. Jun 30, 2020 $21.05 4.83% 3,100.29 1.84%
18. Jul 31, 2020 $23.10 9.74% 3,271.12 5.51%
19. Aug 31, 2020 $26.21 13.46% 3,500.31 7.01%
20. Sep 30, 2020 $24.87 -5.11% 3,363.00 -3.92%
21. Oct 31, 2020 $24.03 -3.38% 3,269.96 -2.77%
22. Nov 30, 2020 $25.79 7.32% 3,621.63 10.75%
23. Dec 31, 2020 $27.73 7.52% 3,756.07 3.71%
24. Jan 31, 2021 $29.60 6.74% 3,714.24 -1.11%
25. Feb 28, 2021 $28.84 -2.57% 3,811.15 2.61%
26. Mar 31, 2021 $28.42 -1.46% 3,972.89 4.24%
27. Apr 30, 2021 $29.84 5.00% 4,181.17 5.24%
28. May 31, 2021 $27.44 -8.04% 4,204.11 0.55%
29. Jun 30, 2021 $31.01 13.01% 4,297.50 2.22%
30. Jul 31, 2021 $37.27 20.19% 4,395.26 2.27%
31. Aug 31, 2021 $38.07 2.15% 4,522.68 2.90%
32. Sep 30, 2021 $36.35 -4.52% 4,307.54 -4.76%
33. Oct 31, 2021 $35.58 -2.12% 4,605.38 6.91%
34. Nov 30, 2021 $32.87 -7.62% 4,567.00 -0.83%
35. Dec 31, 2021 $34.97 6.39% 4,766.18 4.36%
36. Jan 31, 2022 $29.71 -15.04% 4,515.55 -5.26%
37. Feb 28, 2022 $30.47 2.56% 4,373.94 -3.14%
38. Mar 31, 2022 $31.64 3.84% 4,530.41 3.58%
39. Apr 30, 2022 $29.11 -8.00% 4,131.93 -8.80%
40. May 31, 2022 $28.05 -3.64% 4,132.15 0.01%
41. Jun 30, 2022 $26.15 -6.77% 3,785.38 -8.39%
42. Jul 31, 2022 $31.28 19.62% 4,130.29 9.11%
43. Aug 31, 2022 $31.94 2.11% 3,955.00 -4.24%
44. Sep 30, 2022 $30.06 -5.89% 3,585.62 -9.34%
45. Oct 31, 2022 $29.97 -0.30% 3,871.98 7.99%
46. Nov 30, 2022 $32.54 8.58% 4,080.11 5.38%
47. Dec 31, 2022 $27.75 -14.72% 3,839.50 -5.90%
48. Jan 31, 2023 $32.93 18.67% 4,076.60 6.18%
49. Feb 28, 2023 $29.82 -9.44% 3,970.15 -2.61%
50. Mar 31, 2023 $34.17 14.59% 4,109.31 3.51%
51. Apr 30, 2023 $41.35 21.01% 4,169.48 1.46%
52. May 31, 2023 $41.53 0.44% 4,179.83 0.25%
53. Jun 30, 2023 $42.78 3.01% 4,376.86 4.71%
54. Jul 31, 2023 $39.25 -8.25% 4,588.96 4.85%
55. Aug 31, 2023 $38.53 -1.83% 4,507.66 -1.77%
56. Sep 30, 2023 $36.64 -4.91% 4,288.05 -4.87%
57. Oct 31, 2023 $38.84 6.00% 4,193.80 -2.20%
58. Nov 30, 2023 $44.05 13.41% 4,567.80 8.92%
59. Dec 31, 2023 $45.74 3.84% 4,769.83 4.42%
Average (R): 2.98% 1.11%
Standard deviation: 10.06% 5.31%

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1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of CMG during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t


Variance and Covariance

Chipotle Mexican Grill Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RCMG,t RS&P 500,t (RCMG,tRCMG)2 (RS&P 500,tRS&P 500)2 (RCMG,tRCMG)×(RS&P 500,tRS&P 500)
1. Feb 28, 2019 14.73% 2.97% 138.00 3.49 21.93
2. Mar 31, 2019 16.95% 1.79% 195.19 0.47 9.59
3. Apr 30, 2019 -3.17% 3.93% 37.83 7.98 -17.38
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2023 13.41% 8.92% 108.79 61.03 81.48
59. Dec 31, 2023 3.84% 4.42% 0.73 11.00 2.83
Total (Σ): 5,864.53 1,634.30 2,092.35
t Date RCMG,t RS&P 500,t (RCMG,tRCMG)2 (RS&P 500,tRS&P 500)2 (RCMG,tRCMG)×(RS&P 500,tRS&P 500)
1. Feb 28, 2019 14.73% 2.97% 138.00 3.49 21.93
2. Mar 31, 2019 16.95% 1.79% 195.19 0.47 9.59
3. Apr 30, 2019 -3.17% 3.93% 37.83 7.98 -17.38
4. May 31, 2019 -4.07% -6.58% 49.75 59.04 54.20
5. Jun 30, 2019 11.06% 6.89% 65.24 33.49 46.74
6. Jul 31, 2019 8.53% 1.31% 30.72 0.04 1.15
7. Aug 31, 2019 5.41% -1.81% 5.86 8.50 -7.06
8. Sep 30, 2019 0.24% 1.72% 7.54 0.37 -1.68
9. Oct 31, 2019 -7.44% 2.04% 108.57 0.88 -9.77
10. Nov 30, 2019 4.63% 3.40% 2.70 5.28 3.78
11. Dec 31, 2019 2.83% 2.86% 0.03 3.07 -0.28
12. Jan 31, 2020 3.58% -0.16% 0.36 1.61 -0.76
13. Feb 29, 2020 -10.78% -8.41% 189.56 90.57 131.03
14. Mar 31, 2020 -15.38% -12.51% 337.39 185.44 250.14
15. Apr 30, 2020 34.22% 12.68% 975.99 134.06 361.72
16. May 31, 2020 14.29% 4.53% 127.74 11.71 38.68
17. Jun 30, 2020 4.83% 1.84% 3.41 0.54 1.35
18. Jul 31, 2020 9.74% 5.51% 45.63 19.40 29.75
19. Aug 31, 2020 13.46% 7.01% 109.82 34.82 61.84
20. Sep 30, 2020 -5.11% -3.92% 65.55 25.29 40.71
21. Oct 31, 2020 -3.38% -2.77% 40.47 15.00 24.63
22. Nov 30, 2020 7.32% 10.75% 18.84 93.10 41.88
23. Dec 31, 2020 7.52% 3.71% 20.60 6.79 11.83
24. Jan 31, 2021 6.74% -1.11% 14.14 4.93 -8.35
25. Feb 28, 2021 -2.57% 2.61% 30.82 2.26 -8.35
26. Mar 31, 2021 -1.46% 4.24% 19.71 9.85 -13.93
27. Apr 30, 2021 5.00% 5.24% 4.05 17.11 8.33
28. May 31, 2021 -8.04% 0.55% 121.59 0.31 6.14
29. Jun 30, 2021 13.01% 2.22% 100.53 1.24 11.19
30. Jul 31, 2021 20.19% 2.27% 295.95 1.37 20.11
31. Aug 31, 2021 2.15% 2.90% 0.70 3.22 -1.50
32. Sep 30, 2021 -4.52% -4.76% 56.28 34.37 43.98
33. Oct 31, 2021 -2.12% 6.91% 26.03 33.74 -29.64
34. Nov 30, 2021 -7.62% -0.83% 112.37 3.76 20.56
35. Dec 31, 2021 6.39% 4.36% 11.59 10.60 11.09
36. Jan 31, 2022 -15.04% -5.26% 324.91 40.51 114.72
37. Feb 28, 2022 2.56% -3.14% 0.18 17.99 1.81
38. Mar 31, 2022 3.84% 3.58% 0.73 6.11 2.12
39. Apr 30, 2022 -8.00% -8.80% 120.56 98.04 108.72
40. May 31, 2022 -3.64% 0.01% 43.89 1.21 7.29
41. Jun 30, 2022 -6.77% -8.39% 95.21 90.21 92.67
42. Jul 31, 2022 19.62% 9.11% 276.69 64.09 133.17
43. Aug 31, 2022 2.11% -4.24% 0.76 28.62 4.67
44. Sep 30, 2022 -5.89% -9.34% 78.67 109.11 92.65
45. Oct 31, 2022 -0.30% 7.99% 10.78 47.34 -22.59
46. Nov 30, 2022 8.58% 5.38% 31.27 18.23 23.87
47. Dec 31, 2022 -14.72% -5.90% 313.43 49.04 123.98
48. Jan 31, 2023 18.67% 6.18% 245.96 25.70 79.50
49. Feb 28, 2023 -9.44% -2.61% 154.45 13.82 46.20
50. Mar 31, 2023 14.59% 3.51% 134.65 5.76 27.84
51. Apr 30, 2023 21.01% 1.46% 325.04 0.13 6.46
52. May 31, 2023 0.44% 0.25% 6.49 0.74 2.19
53. Jun 30, 2023 3.01% 4.71% 0.00 13.02 0.09
54. Jul 31, 2023 -8.25% 4.85% 126.23 13.99 -42.02
55. Aug 31, 2023 -1.83% -1.77% 23.21 8.28 13.86
56. Sep 30, 2023 -4.91% -4.87% 62.24 35.73 47.16
57. Oct 31, 2023 6.00% -2.20% 9.12 10.92 -9.98
58. Nov 30, 2023 13.41% 8.92% 108.79 61.03 81.48
59. Dec 31, 2023 3.84% 4.42% 0.73 11.00 2.83
Total (Σ): 5,864.53 1,634.30 2,092.35

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VarianceCMG = Σ(RCMG,tRCMG)2 ÷ (59 – 1)
= 5,864.53 ÷ (59 – 1)
= 101.11

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (59 – 1)
= 1,634.30 ÷ (59 – 1)
= 28.18

CovarianceCMG, S&P 500 = Σ(RCMG,tRCMG)×(RS&P 500,tRS&P 500) ÷ (59 – 1)
= 2,092.35 ÷ (59 – 1)
= 36.07


Systematic Risk (β) Estimation

Microsoft Excel
VarianceCMG 101.11
VarianceS&P 500 28.18
CovarianceCMG, S&P 500 36.07
Correlation coefficientCMG, S&P 5001 0.68
βCMG2 1.28
αCMG3 1.57%

Calculations

1 Correlation coefficientCMG, S&P 500
= CovarianceCMG, S&P 500 ÷ (Standard deviationCMG × Standard deviationS&P 500)
= 36.07 ÷ (10.06% × 5.31%)
= 0.68

2 βCMG
= CovarianceCMG, S&P 500 ÷ VarianceS&P 500
= 36.07 ÷ 28.18
= 1.28

3 αCMG
= AverageCMG – βCMG × AverageS&P 500
= 2.98%1.28 × 1.11%
= 1.57%


Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.48%
Expected rate of return on market portfolio2 E(RM) 13.84%
Systematic risk (β) of Chipotle Mexican Grill Inc. common stock βCMG 1.28
 
Expected rate of return on Chipotle Mexican Grill Inc. common stock3 E(RCMG) 16.47%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 E(RCMG) = RF + βCMG [E(RM) – RF]
= 4.48% + 1.28 [13.84%4.48%]
= 16.47%