How can CBOU become CMG?
Here's a quizz question.... What do you look at to determine how a growth story small shop can grow and become as big as a big time company with a big time share price?
There's a lot you have to look at.... First, in any sector you have to realize there are subsectors and business lines... I used to think that the ridiculous press releases about "Such and Such market is $300 billion" because there was no way a small company would ever grow to earn anything close to that....
But you have to at least understand that if Business A is in a business sector that makes $300 billion while your Stock... Business B is in a sector that makes $150 Billion, that the growth rates for your business versus the bigger business A is drastically different.
But how different??? That is where you have to be extremely smart and really have to think.
Just because (TODAY) one sub-sector of the Restaurant Business is cumulative making far more money than another sub-sector does not mean there is a Greater sub-sector and a Lesser one..
You also have to disect whether or not the smaller earning sub-sector is the way that it is because it is simply newer..... being Newer means no company exists doing business in that sub-sector for anywhere close to as long as Business A and its competition has been doing business.
The longer you exist the chances are the bigger you become and thus more earnings you can pull.
So you have to identify a lot of factors involved to explain for example:
Selling Coffee + Tea (CBOU) or (GMCR) or (SBUX) examples...
Selling Dinners, Lunches, Breakfasts (CMG)
Let's compare CBOU against CMG..
20 million shares outstanding
Share price today at the close $10.10
Expected EPS for 2010 is .43eps (was .44 last week Friday)
Cash per Share .89
P/Cash Flow 9.9
31.1 Million shares outstanding
Share price today at the close $151.34
Expected EPS for 2010 is $5.10
Cash per Share $9.84
P/Cash Flow 21.9
CMG has about twice as many shops as CBOU in 35 states... far more states than CBOU.
It has a much bigger international business than CBOU.
But none of that explains anything better than Line of Business that CMG is in versus a CBOU.
You simply can expect more growth from a CMG to justify the much higher P/E ratio and P/Cash Flow multiple.
Simply put.... Don't just look at the #s in the Financials to compare 1 stock versus another.
You need to know the Line of Business they are in as well as how NEW and TRENDY one business is versus another.
For example.... E-Books do not earn more $$$$$$ yet versus Paper / Hardcover books....
But, I would not think to buy a Barnes and Knoble or Borders versus an Amazon or Apple simply because there's more money today in PAPER Books versus electronic....
You have to follow the trend and determine if the Electronic Business for Books is going to eventually surpass that of the Paper Books...
Remember when Video Games made significantly less money than Movies?
Now Movies make significantly less money than Games!
See how it works?
If a stock boasts some new technology they just researched and are going to manufacture in mass production this year or next year... or in 5 years.... PAY ATTENTION!!!!