The average target price of CAVA is 114 and suggests 35% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 125.0. This translates into 48% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 91.0. This suggests 8% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

CAVA Group, Inc. owns and operates a chain of Mediterranean restaurants. The company offers salads, dips, spreads, toppings, and dressings. It sells its products through whole food markets and grocery stores. The company also provides online food ordering services. Cava Group, Inc. was founded in 2006 and is based in Washington, District of Columbia.

CAVA Group, Inc.

Consumer Cyclical

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

CAVA reported revenue of USD 1 037mn in the last 12 months, up 8% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 9% from FY24 to USD 1.24. Market expects EPS to reach USD 0.50 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 35ppts and its growth accelerated by 3ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 12.7% in the last 12 months, up from 7.8% in FY23. 

Historically, CAVA has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 13.7%, a growth from 1.8% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 12.4% in the last 12 months, an increase from 1.5% in FY23. The market analysts predict that RoA will be 5.9% in FY24, though below its peers in this period. 

CAVA Group, Inc. reported a return on equity (RoE) of 21.9% in the last 12 months, up from 3.4% in FY23. The market consensus projects an RoE of 11.0% in FY24, however, this time below its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 13.9%, above the peers. The consensus estimate for FY24 for RoCE is 4.7%, however, this time below its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.0 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

CAVA boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually quite stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, low margin volatility, and adequate interest coverage, among the positive credit factors. Among the negative credit factors and we point to bleak profitability, poor working capital management.

In highly turbulent market conditions, CAVA is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, CAVA is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to immense. 

Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, overvalued on P/FCF. 

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CAVA Group, Inc.

$ 88.01

4

CAVA Group, Inc.

$ 88.01

4

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$ 88.01

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