Welcome to Extreme Investor Network, where we bring you the latest and greatest in the world of finance. Today, we’re going to talk about a rising star in the restaurant industry that has investors buzzing – Cava Group (NYSE: CAVA).
When it comes to the restaurant space, investors are always looking for the next big thing, and for good reason. Just look at Chipotle Mexican Grill (NYSE: CMG), whose stock has skyrocketed over 7,000% since it went public in 2006.
Cava Group, a fast-casual Mediterranean restaurant concept, is the latest contender to potentially follow in Chipotle’s footsteps. With a rapidly growing restaurant base and strong revenue growth in the first quarter, Cava is definitely a stock to watch.
Breaking down the numbers
In its fiscal Q1, Cava reported a 30% increase in revenue to $256.3 million, driven by the expansion of its restaurant base. Same restaurant sales grew 2.3%, with a 4.3% growth when adjusted for holiday shifts. The company also saw a 3.5% benefit from menu price increases and mix, although guest traffic was down slightly.
Despite facing tough comparisons from the previous year, Cava managed to turn a profit, with earnings per share of $0.12 compared to a loss of $1.30 a year earlier. Adjusted EBITDA nearly doubled to $33.3 million, and the company generated $38.4 million in operating cash flow and $4.7 million in free cash flow.
With its solid performance in the first quarter, Cava raised its full-year guidance, expecting same restaurant sales growth of 4.5% to 6.5% and adjusted EBITDA of $100 million to $105 million. The company also plans to open between 50 to 54 new locations this fiscal year.
Is now the time to buy?
Despite Cava’s strong financials, its stock price fell after the latest earnings report. This could be due to its high valuation, with a forward P/E of 230 times and a price-to-sales ratio of 9.6 times. Compared to industry peers like Chipotle and Shake Shack, Cava’s stock looks expensive.
However, with less than a tenth of the number of restaurants that Chipotle has, Cava has room to grow. If the concept continues to gain popularity and expand nationwide, it could see significant upside in the next decade or two.
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So, is Cava Group the next Chipotle? Only time will tell. Stay tuned to Extreme Investor Network for more exciting updates on the world of finance.
Disclaimer: Geoffrey Seiler has positions in Shake Shack. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Cava Group. The Motley Fool has a disclosure policy.