Chipotle Mexican Grill Inc. (NYSE:CMG)

The period demonstrates a consistent upward trend in net operating profit after taxes (NOPAT), alongside increasing invested capital. This has resulted in a significant and positive trajectory in Return on Invested Capital (ROIC).

Net Operating Profit After Taxes (NOPAT)

NOPAT experienced substantial growth over the five-year period, increasing from US$796.406 million in 2021 to US$1,835.501 million in 2025. The rate of increase appears to have moderated slightly between 2023 and 2025, although growth remains positive.

Invested Capital

Invested capital also increased consistently throughout the period, rising from US$5,496.598 million in 2021 to US$7,294.198 million in 2025. The increase in invested capital is generally proportional to the growth in NOPAT, suggesting strategic allocation of resources.

Return on Invested Capital (ROIC)

ROIC exhibited a strong upward trend, beginning at 14.49% in 2021 and reaching 25.16% in 2025. This indicates improving efficiency in capital utilization and a greater ability to generate profits from invested funds. The increase between 2021 and 2023 was particularly pronounced. The growth rate of ROIC slowed between 2023 and 2025, with a marginal increase from 25.05% to 25.16%, suggesting potential limitations to further substantial improvements without significant changes in capital structure or operational efficiency.

Overall, the financial performance suggests effective capital management and increasing profitability. The sustained growth in ROIC is a positive indicator of the company’s ability to generate returns for investors.

The period demonstrates a consistent improvement in financial performance, as evidenced by the increasing Return on Invested Capital (ROIC). This improvement is attributable to changes in operating profitability, capital efficiency, and tax effects. A decomposition of ROIC reveals the key drivers of this trend.

Operating Profit Margin (OPM)

The Operating Profit Margin exhibited a clear upward trend from 2021 to 2024, increasing from 13.23% to 20.10%. This indicates a strengthening ability to generate profit from core operations. A slight decrease to 19.18% is observed in 2025, but the level remains significantly higher than in 2021. This suggests improved cost management or pricing strategies.

Turnover of Capital (TO)

The Turnover of Capital, a measure of capital efficiency, shows a steady increase from 1.38 in 2021 to 1.66 in 2024. This suggests the company is becoming more effective at generating sales from its invested capital. A minor decline to 1.64 is noted in 2025, but the ratio remains at a relatively high level, indicating continued efficient capital utilization.

Effective Cash Tax Rate Adjustment (1 – CTR)

The adjustment for the Effective Cash Tax Rate fluctuated over the period. It decreased from 79.46% in 2021 to 73.80% in 2022, then increased to 76.03% in 2023, decreased slightly to 75.02% in 2024, and finally rose to 80.22% in 2025. This indicates changes in the actual cash taxes paid relative to reported income, impacting the after-tax profitability contributing to ROIC. The increase in 2025 suggests a higher proportion of cash taxes paid.

Return on Invested Capital (ROIC)

The ROIC demonstrates a consistent and substantial increase, rising from 14.49% in 2021 to 25.16% in 2025. This growth is directly correlated with the improvements in Operating Profit Margin and Turnover of Capital, partially offset by fluctuations in the Effective Cash Tax Rate adjustment. The sustained high ROIC in 2024 and 2025 indicates a strong ability to generate returns from invested capital.

In summary, the observed trends suggest a strengthening financial position driven by improved operational efficiency and profitability. While the Effective Cash Tax Rate adjustment introduces some variability, the overall trajectory of ROIC is positive, indicating effective capital allocation and management.

The operating profit margin (OPM) demonstrates a clear upward trend between 2021 and 2024, followed by a slight decrease in the most recent year presented. This indicates improving profitability from operations over the initial period, with a stabilization and minor pullback in the latest reporting period.

Operating Profit Margin (OPM) - Trend Analysis

The OPM increased consistently from 13.23% in 2021 to 20.10% in 2024. This represents a substantial improvement in the company’s ability to generate profit from its core business activities. The increase suggests effective cost management, pricing strategies, or a combination of both.

In 2025, the OPM experienced a modest decline to 19.18%. While still a strong margin, this decrease warrants further investigation to determine the underlying causes. Potential factors could include increased operating expenses, shifts in sales mix, or competitive pressures.

Relationship between NOPBT and Adjusted Revenue

Net operating profit before taxes (NOPBT) increased year-over-year from 2021 to 2024, mirroring the upward trend in OPM. This growth in NOPBT is directly correlated with the growth in adjusted revenue, but the increasing OPM indicates that profitability improved at a faster rate than revenue.

The slight decrease in OPM in 2025, despite continued revenue growth, suggests that the rate of profit generation did not keep pace with the increase in sales. NOPBT also shows a smaller increase in 2025 compared to prior years, supporting this observation.

Overall, the financial information suggests a period of strong and improving operational profitability, with a recent indication of potential stabilization or minor challenges to maintaining the peak margin achieved in 2024. Continued monitoring of OPM and its underlying drivers will be crucial for assessing future performance.

The analysis reveals a generally positive trend in the turnover of capital, with a slight moderation in the most recent period examined. Adjusted revenue consistently increased throughout the period, while invested capital also increased, though not at the same rate, contributing to the observed changes in capital turnover.

Turnover of Capital (TO)

The turnover of capital ratio demonstrates an increasing trend from 1.38 in 2021 to 1.66 in 2023. This indicates that the company is generating more revenue for each dollar of invested capital. The increase from 2021 to 2022 was more substantial (0.23) than the increase from 2022 to 2023 (0.04), suggesting diminishing returns from capital deployment during the latter period. In 2024, the ratio remained stable at 1.66. A slight decrease to 1.64 is observed in 2025, potentially signaling a stabilization or minor reduction in the efficiency of capital utilization.

The consistent growth in adjusted revenue, coupled with the increasing, but moderated, turnover of capital, suggests effective capital allocation and operational efficiency. The leveling off and slight decline in the most recent year warrants further investigation to determine if this represents a temporary fluctuation or the beginning of a more pronounced trend.

Revenue Growth & Invested Capital

Adjusted revenue increased year-over-year throughout the examined period. However, the rate of increase in invested capital was lower than the rate of revenue growth, particularly in 2022 and 2023, which contributed to the improvements in the turnover of capital ratio. The continued increase in invested capital in 2024 and 2025, while supporting revenue growth, appears to have had a marginal impact on the turnover ratio, resulting in stabilization and a slight decrease.

Overall, the company demonstrates a positive ability to generate revenue from its invested capital. Monitoring the turnover of capital ratio in future periods will be crucial to assess whether the recent stabilization and slight decline represent a temporary anomaly or a shift in the company’s capital efficiency.

The effective cash tax rate exhibited fluctuations over the five-year period. Cash operating taxes increased consistently from 2021 to 2023, then experienced a decrease in 2025. Simultaneously, net operating profit before taxes demonstrated a general upward trajectory, though the rate of increase slowed in the later years of the period.

Effective Cash Tax Rate (CTR) - Trend Analysis

The effective cash tax rate began at 20.54% in 2021 and rose to a peak of 26.20% in 2022. A subsequent decline to 23.97% occurred in 2023, followed by a further increase to 24.98% in 2024. The most recent year, 2025, saw a notable decrease to 19.78%. This suggests potential shifts in the company’s tax profile, possibly related to changes in tax laws, the utilization of tax credits, or alterations in the geographic distribution of profits.

Relationship between NOPBT and Cash Taxes

Net operating profit before taxes increased from US$1,002,252 thousand in 2021 to US$2,288,189 thousand in 2025. The increase in cash operating taxes generally followed this trend, indicating a correlation between profitability and tax payments. However, the CTR’s fluctuations indicate that the proportion of pre-tax profit paid as cash taxes varied, despite the overall increase in both figures. The decrease in the CTR in 2025, despite relatively stable NOPBT, suggests a reduction in the actual cash taxes paid relative to pre-tax income.

The observed variations in the effective cash tax rate warrant further investigation to determine the underlying drivers. Understanding these factors is crucial for accurate financial forecasting and assessing the company’s long-term tax obligations.