Burrito-centric restaurant chain Chipotle Mexican Grill (NYSE: CMG) made its public market debut manner again in 2006. However in June, it plans to do one thing it is by no means performed earlier than: break up its inventory.Administration is proposing a large 50-for-1 inventory break up, which means buyers will obtain 49 further shares for each share they at the moment personal. It isn’t fairly a performed deal but because the plan wants shareholder approval, but it surely’s prone to undergo.Inventory splits are having fun with their time within the monetary headlines. Nonetheless, there are extra necessary issues to observe with Chipotle inventory, and there is just one factor that may very well be significant with regards to the 50-for-1 break up.What buyers have to knowThere’s no cause to hurry out and purchase Chipotle inventory forward of its inventory break up as a result of inventory splits do not do something to create shareholder worth. As of this writing, Chipotle inventory trades close to $3,000 per share. After the 50-for-1 break up, it’ll commerce nearer to $60 per share — no worth created or misplaced.Sooner or later, Chipotle will create shareholder worth because it has previously — with worthwhile progress of its enterprise.Chipotle actually has been a marvel because it went public. The corporate has grown from roughly 500 areas to greater than 3,400 right this moment, fueling its income progress. However the high line has additionally benefited from larger gross sales per location — common unit volumes greater than doubled from $1.4 million in 2005 to over $3 million on the finish of 2023.Extra areas and better gross sales per location have led to explosive progress for Chipotle’s backside line too.CMG Income (TTM) ChartThis is how Chipotle has pushed its inventory from $22 at IPO to over $2,900 as of this writing, and that is the way it will proceed to create shareholder worth going ahead.To be clear, Chipotle CEO Brian Niccol believes the corporate’s progress story is much from over. When reporting full-year 2023 outcomes, Niccol stated the corporate can surpass 7,000 areas in North America long run, which is greater than double its footprint right this moment. And he believes common unit volumes can ultimately climb above $4 million.Story continuesChipotle’s inventory break up will not have an effect on its potential to succeed in these enterprise objectives, which is why buyers are much better served specializing in the enterprise itself.There are some causes to care concerning the inventory splitI simply laid out why inventory splits do not matter, however I am going to concede there are different advantages to Chipotle’s 50-for-1 break up. First, a inventory buying and selling at $60 per share is simpler for on a regular basis buyers to abdomen than one buying and selling at $2,900 per share. Not everybody has entry to fractional shares, and the post-split worth may deliver new buyers into Chipotle inventory.On a associated observe, Chipotle inventory choices will turned far more attainable as effectively. With choices contracts, buyers should take care of no less than 100 shares. At present ranges, choices for Chipotle require near a $300,000 consideration, once more pricing out many individuals.There are lots of of stock-option methods, and plenty of of them are terribly dangerous. However one of many safer methods known as a buy-write, and it may be useful in sure circumstances. I feel Chipotle inventory is such a case.For context, I really like Chipotle’s enterprise, however I am involved concerning the valuation of its inventory. It is by no means been an affordable inventory, however because the chart beneath exhibits, it is now buying and selling at its highest price-to-sales valuation ever.CMG PS Ratio ChartLet’s say an investor needed to purchase 100 shares of Chipotle after the break up, however like me, they do not love the valuation. This investor may purchase 100 shares and concurrently promote a name possibility. For this, the investor would obtain cost and consequently decrease (modestly) the all-in price to purchase Chipotle inventory.The draw back of this technique is an investor must promote their Chipotle shares if it climbed previous the choice worth inside the specified time interval. They may probably miss out on larger good points whereas making a short-term taxable occasion.One other potential choices technique is for current shareholders. As an example an investor owns 10 shares of Chipotle that they purchased way back. After the break up, they’re going to personal 500 shares.Chipotle would not pay a dividend so it isn’t an revenue inventory. However buyers may take their 500 shares and create revenue with choices through the use of standard methods. That may very well be interesting for long-term shareholders.So whereas Chipotle’s inventory break up would not contain materials modifications to the enterprise, it may nonetheless have optimistic implications for buyers.Must you make investments $1,000 in Chipotle Mexican Grill proper now?Before you purchase inventory in Chipotle Mexican Grill, think about this:The Motley Idiot Inventory Advisor analyst group simply recognized what they consider are the 10 greatest shares for buyers to purchase now… and Chipotle Mexican Grill wasn’t certainly one of them. The ten shares that made the minimize may produce monster returns within the coming years.Inventory Advisor supplies buyers with an easy-to-follow blueprint for fulfillment, together with steering on constructing a portfolio, common updates from analysts, and two new inventory picks every month. The Inventory Advisor service has greater than tripled the return of S&P 500 since 2002*.See the ten shares*Inventory Advisor returns as of March 21, 2024Jon Quast has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Chipotle Mexican Grill. The Motley Idiot has a disclosure coverage.Ought to You Purchase Chipotle Inventory Forward of Its 50-for-1 Inventory Cut up? was initially printed by The Motley Idiot