Is CAVA Stock’s Recent Rally Sustainable?
CAVA Group Inc. (NYSE: CAVA) has increased 17% in the past one month, sharply outperforming the S&P 500’s 2% gain over the same period. The stock is back in focus as investors reassess whether Cava’s rapid growth trajectory can continue to justify its premium valuation, particularly amid questions around margins, traffic sustainability, and execution risk.
While investor sentiment has clearly cooled—with the stock down roughly 50% over the past year despite the recent rebound—the underlying business remains in expansion mode. This disconnect between strong operating performance and a still-demanding valuation sits at the heart of the current debate.
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: Separately see, Intel Stock Gifts $92 Billion To Investors.
Strong Operating Momentum Remains Intact
Operationally, CAVA continues to deliver. In recent quarters, the company has posted double-digit same-store sales growth, driven primarily by traffic gains rather than price, a key indicator of genuine demand strength.
CAVA’s revenue rose nearly 20% year over year in the most recent quarter, reaching $292 million, supported by menu innovation and strong consumer interest in fast-casual Mediterranean cuisine. These trends previously helped propel the stock into the spotlight as one of the top-performing restaurant names, frequently compared to early-stage Chipotle Mexican Grill (NYSE: CMG) during its rapid expansion phase.
Valuation Has Become the Central Concern
Despite the steep selloff, CAVA’s valuation remains elevated relative to both the broader market and mature restaurant peers. The stock trades at roughly 45x trailing earnings and over 6x sales, compared to about 38x earnings and 11x sales for the S&P 500.
At these levels, the market is effectively pricing in years of sustained 20%+ revenue growth alongside meaningful margin expansion. That leaves little margin for error—meaning even a 100–200 basis point miss in margins or a modest slowdown in traffic can result in outsized stock moves.
Also see Buy or Fear CAVA Stock?
Growth Is Very Strong, But the Base Is Still Small
CAVA’s growth profile remains impressive. Over the past three years, revenue has grown at an average rate of approximately 29% annually. Over the last twelve months, sales increased 24%, rising from about $913 million to $1.1 billion.
However, scale matters. With annual revenue still just over $1 billion, sustaining near-30% growth becomes increasingly difficult as the store base expands. Each incremental slowdown—from 25% to 20%, or 20% to mid-teens—can have a disproportionate impact on valuation.
Profitability Is Improving, But Still Lags Mature Peers
Profitability remains the key gap. Over the last twelve months, CAVA generated approximately $79 million in operating income, translating to an operating margin of just 7%. By comparison, established fast-casual leaders often operate with margins in the 20%+ range.
That said, cash generation has been improving. CAVA produced roughly $174 million in operating cash flow, while net income reached about $137 million, implying a 12% net margin. Still, margins remain sensitive to labor costs, food inflation, and promotional activity, especially as new stores ramp more slowly in a competitive environment.
For more details see: CAVA Valuation Ratios | CAVA Revenue Comparison | CAVA Operating Income Comparison
Balance Sheet Strength Provides a Cushion
One of CAVA’s strongest attributes is its balance sheet. The company ended the most recent quarter with approximately $388 million in cash and equivalents, against $443 million in total debt.
This translates to a relatively low debt-to-equity ratio of about 6%, with cash accounting for nearly 30% of total assets. That liquidity gives CAVA the flexibility to continue investing in growth, absorb short-term margin pressure, and navigate economic slowdowns without relying heavily on external financing.
Bottom Line: Quality Brand, But Valuation Still Matters
CAVA remains a high-quality growth company, supported by strong demand trends and a solid financial position. However, with margins still maturing and valuation multiples elevated, the stock offers limited room for disappointment. A lower entry point would better balance near-term risk with the company’s long-term growth opportunity.
For investors seeking upside while limiting single-stock volatility, diversified approaches such as the Trefis Reinforced Value (RV) Portfolio may provide a more balanced way to participate in growth without taking concentrated risk.
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