In the restaurant space, investors are constantly on the lookout for the next potential Chipotle Mexican Grill (NYSE: CMG) contender. Chipotle’s stock has seen an impressive increase of over 7,000% since its IPO in 2006.
One such contender is Cava Group (NYSE: CAVA), a fast-growing Mediterranean restaurant fast-casual concept. The company has been expanding its restaurant base rapidly and reported strong revenue growth in the first quarter.
Examining Cava’s recent earnings report reveals a surge in revenue for its fiscal Q1, which ended on April 21, with a 30% increase to $256.3 million. Same restaurant sales grew by 2.3%, and the company also reported a profit, with earnings per share of $0.12 compared to a loss of $1.30 a year earlier.
Cava also raised its full-year guidance, expecting same restaurant sales growth between 4.5% to 6.5% and adjusted EBITDA between $100 million to $105 million. The company plans to open between 50 to 54 new locations this fiscal year.
Despite its strong performance, Cava’s shares have seen a decline post-earnings report. The stock’s valuation, with a forward P/E of 230 times and a price-to-sales ratio of 9.6 times, is considered high. However, given its growth potential and expansion plans, Cava could be a potential long-term winner.
It’s important to note that Cava currently has significantly fewer restaurants than Chipotle in the U.S., leaving room for potential growth in the future. While the stock may seem expensive now, it could see substantial upside if it can replicate Chipotle’s success over the next couple of decades.
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