Things To Be Wary Of When Buying Cava Stock

August 19th, 2025 by Trefis Team
CAVA: Cava logo
CAVA
Cava

Cava Group Inc. (NYSE: CAVA) has fallen 20% in the past month after posting softer Q2 sales and lowering its guidance, but the stock appears more like a Hold than a Sell. For investors with a higher risk appetite, it could even be a Buy on weakness, given the company’s strong growth profile and solid financial footing. The company continues to deliver robust growth and solid financial stability, but its valuation is steep, leaving the stock volatile and vulnerable to even modest disappointments.

The sell-off followed Cava’s Q2 earnings, where same-restaurant sales rose just 2.1% versus expectations of about 6%. Management also cut its full-year sales growth outlook to 4%–6%, down from 6%–8%. The miss raised questions about whether the company can sustain the pace needed to justify its lofty valuation. These results highlight the growing pressure across the fast-casual dining space, where peers like Chipotle Mexican Grill (NYSE: CMG) are also seeing weaker traffic. Separately see Tempus AI: TEM Stock To $130?

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio is designed to reduce stock-specific risk while giving upside exposure. Let’s get into details of each of the assessed factors, but before that, for quick background: With $8.1 Bil in market cap, Cava is a Mediterranean fast-casual restaurant brand offering healthful food with bold, satisfying flavors delivered at scale. Separately see, Ethereum: ETH Price To $10,000?

[1] Valuation Looks Very High

Cava trades at a steep premium to the market. Its price-to-sales ratio is 7.4, more than double the S&P 500’s 3.2. On earnings, the multiple stretches to 59.1 versus 21.9, and on free cash flow, it soars to 169.6 compared with 23.6 for the index. These metrics highlight the strong premium investors are placing on the stock. For more details see: CAVA Valuation Ratios

[2] Growth Is Very Strong

Cava’s growth has been exceptional. Over the past three years, revenues have risen at an average annual rate of 29.6% versus 5.7% for the S&P 500. In the last twelve months, sales climbed 28% from $845 million to $1.1 billion, and most recently, quarterly revenue jumped 20.3% year-over-year to $278 million. By comparison, the index grew just over 5%. For more details, see: CAVA Revenue Comparison

[3] Profitability Appears Moderate

Over the past year, Cava generated $74 million in operating income, a 6.8% margin, alongside $173 million in operating cash flow (15.9% margin) and $141 million in net income (13.0% margin). While its operating and cash flow margins trail the S&P 500, its net margin is slightly stronger than the index’s 12.7%. For more details see: CAVA Operating Income Comparison

[4] Financial Stability Looks Very Strong

Cava carries relatively little debt and a healthy cash balance. Its debt-to-equity ratio is just 5.4%, well below the S&P 500 average of 21.4%. Meanwhile, cash makes up nearly 30% of total assets, compared with 6.9% for the index, giving the company flexibility to invest and weather uncertainty.

Looking for Smarter Alternatives?

Cava combines very strong growth and financial stability with only moderate profitability. Its sky-high valuation makes it volatile, but the stock remains attractive for investors comfortable with risk.

You could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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