Investors have been happy about both Chipotle (NYSE: CMG) and McDonald’s (NYSE: MCD) businesses for most of the past year. The companies had been satisfying Wall Street with their growth figures into early 2024, but investors now have a clear favorite fast-food specialist.

Chipotle’s stock is up 40% in 2024 and is sitting near an all-time high. McDonald’s is trailing the S&P 500, meanwhile, having shed 8% in 2024 to date.

The biggest factor driving that performance gap is Chipotle’s quality of growth when compared to its larger rival. Sure, both companies are boosting comparable-store sales right now. Yet McDonald’s is achieving that growth through higher prices while Chipotle is earning its revenue gains the hard way.

Let’s look at the difference in this key are, along with whether that makes the burrito chain an obvious buy over McDonald’s right now.

Customer traffic trends

Chipotle this past quarter reported a blazing 14% sales increase as Q1 revenue jumped to $2.7 billion. Part of that increase came from an expanding store base, sure. But sales at existing locations were up 7%, trouncing the 2% growth at McDonald’s.

Chipotle isn’t relying on price increases to drive sales higher, either. Higher traffic is doing all the heavy lifting instead. The chain handled 5% more diners this quarter compared to a year ago, keeping many stores operating near capacity for the core lunch hours. “We had another outstanding quarter driven by our improvement in throughput and successful marketing initiatives,” CEO Brian Niccol said in a late April press statement.

McDonald’s said in February that customer traffic dipped into negative territory late in Q4, and that trend apparently worsened into the start of the fiscal year. The chain’s comps decelerated to 2.5% in the core U.S. market from 4.3% in the prior quarter. “Consumers are more discriminating with every dollar that they spend,” CEO Chris Kempczinski said in a late April announcement .

Where McDonald’s wins

McDonald’s still has Chipotle beat in key financial metrics like cash flow and profitability. Operating profit improved to 44.3% of sales from 42.9% of sales this past quarter, making the fast-food giant among the most profitable companies in any industry. Chipotle, for comparison, converts about 17% of sales into operating earnings.

CMG Operating Margin (TTM) data by YCharts

That profit gap is mainly due to McDonald’s franchised selling approach that results in a steady flow of franchise, royalty, and rent fees. These income streams are far more profitable than food sales.

You’ll also get more cash returns from owning McDonald’s stock over its smaller rival. The chain has been paying a dividend for more than 25 consecutive years and its most recent annual raise was a healthy 10%. Chipotle is more focused on making growth investments and so it pays no dividend.

Chipotle’s high valuation

The stocks’ valuation gap reflects Wall Street’s different expectations for their businesses in 2024 and beyond. Chipotle is priced at 9 times sales, which is the highest premium investors have had to pay for this fast-food stock in 3 years. McDonald’s, in contrast, is valued at below 8 times sales. That’s near the lowest premium available for this fast-food titan in the past 3 years.

If you’re a fan of growth, you still might want to pay up for Chipotle over McDonald’s today. The chain has excellent market share momentum, and it can build on that healthy traffic metric to continue accelerating its sales trends. A McDonald’s investment won’t be as volatile, especially with its steady dividend income. But the fast-food giant’s stock could remain under pressure until the company can prove it can boost traffic in this competitive selling environment.

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Demitri Kalogeropoulos has positions in Chipotle Mexican Grill and McDonald’s. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.