With a business model reminiscent of Chipotle Mexican Grill in the realm of Mediterranean cuisine, Cava Group has emerged as a stock market champion since its IPO debut just a year ago.
Following its impressive Q2 financial results, Cava Group’s stock witnessed a remarkable +19% surge on Friday, propelling its year-to-date growth to an astonishing +183%, outshining both the broader market and Chipotle’s +17% surge.
Cava Group’s Q2 Results
In the latest quarter, Cava Group reported sales of $233.5 million, marking a 35% increase from the same period last year and surpassing analyst expectations by 5%. Despite a decrease in earnings per share from a year ago, the company managed to beat EPS estimates and experienced a notable 9.5% increase in foot traffic, fueled by the opening of 18 new restaurants, including a venture into the Midwest market with a presence in Chicago.
Impressively, Cava Group has consistently exceeded earnings projections in each of the five quarters since going public.
Cava Group’s Growth Trajectory
Analysts foresee a rosy future for Cava Group, with estimated total sales projected to climb 24% in fiscal 2024 to $907.58 million, compared to $728.7 million in 2023. Further growth is anticipated in FY25, with a forecasted 20% increase to $1.09 billion. Earnings per share are expected to skyrocket by 66% this year and are poised for a 34% surge in FY25.
Cava Group’s Valuation
Despite its promising growth trajectory, Cava Group’s stock is currently trading at a premium of 291.3 times forward earnings, reflecting the post-IPO enthusiasm surrounding the company. Additionally, the stock commands a sales premium relative to the broader market, with a ratio of 12.8 times compared to S&P 500’s average of 5.4 times and Chipotle’s 6.4 times.
Bottom Line
While Cava Group’s stellar Q2 performance underscores its growth potential, the stock currently holds a Zacks Rank #3 (Hold). The company presents an enticing long-term investment opportunity, yet investors may find more favorable entry points given the substantial surge in the stock’s valuation this year.
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