Cava Group (NYSE: CAVA) inventory was a breakout winner final yr because the market cap of the Mediterranean fast-casual restaurant chain greater than doubled on blistering progress. The numbers the corporate is producing proper now are harking back to Chipotle Mexican Grill, the chief and pioneer in quick informal, and Cava’s common unit volumes, or common gross sales per restaurant, are already approaching Chipotle ranges.
Nevertheless, after hovering by way of most of 2024, Cava’s inventory worth pulled again following the discharge of its third-quarter earnings report in mid-November, seemingly attributable to valuation considerations as its outcomes had been sturdy. Even after a rebound this month, the inventory trades down 17% from its earlier peak.
The place to take a position $1,000 proper now? Our analyst workforce simply revealed what they imagine are the 10 finest shares to purchase proper now. See the 10 stocks »
On one stage, the inventory does look costly, buying and selling at a price-to-earnings ratio above 200, however in case you take a more in-depth have a look at the numbers, you may discover that Cava is not fairly as costly as you thought. As you possibly can see from the chart beneath, analysts have quickly revised their earnings estimates greater for the corporate, exhibiting they’ve persistently underestimated it.
Information by YCharts.
Analysts’ consensus forecasts for 2024’s earnings tripled over the course of the yr, and so they may very well be underestimating the inventory going into 2025 as nicely. The consensus name for 2025 is that earnings per share will rise from $0.50 to $0.64.
If Cava continues to ship sturdy comparable gross sales progress — comps had been up 18.1% within the third quarter — and continues to open new eating places, it is prone to high that forecast.
Nevertheless, there’s one more reason that Cava inventory is not as costly as it’d look. The chain remains to be small, with simply 352 areas as of the top of the third quarter. Examine that to Chipotle’s greater than 3,000 areas. Cava is aiming to have greater than 1,000 eating places open by the top of the last decade, however the chain may develop nicely past that over the long run.
Given its latest outcomes, there seems to be loads of room for progress forward, and revenue margins ought to develop as its operations scale up. There’s extra to the Cava story than a excessive share worth.
Must you make investments $1,000 in Cava Group proper now?
Before you purchase inventory in Cava Group, contemplate this:
The Motley Idiot Inventory Advisor analyst workforce simply recognized what they imagine are the 10 best stocks for traders to purchase now… and Cava Group wasn’t one in all them. The ten shares that made the minimize may produce monster returns within the coming years.
Think about when Nvidia made this checklist on April 15, 2005… in case you invested $1,000 on the time of our advice, you’d have $874,051!*
Inventory Advisor supplies traders with an easy-to-follow blueprint for fulfillment, together with steerage on constructing a portfolio, common updates from analysts, and two new inventory picks every month. The Inventory Advisor service has greater than quadrupled the return of S&P 500 since 2002*.
*Inventory Advisor returns as of January 21, 2025
Jeremy Bowman has positions in Chipotle Mexican Grill. The Motley Idiot has positions in and recommends Chipotle Mexican Grill. The Motley Idiot recommends Cava Group and recommends the next choices: brief March 2025 $58 calls on Chipotle Mexican Grill. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
