The average target price of FWRG is 25 and suggests 61% 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 28.0. This translates into 78% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 18.0. This suggests 14% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

First Watch Restaurant Group, Inc. operates and franchises restaurants under the First Watch trade name. As of March 23, 2022, it operated 341 company-owned restaurants and 94 franchised restaurants in 28 states in the United States. The company was formerly known as AI Fresh Super Holdco, Inc. and changed its name to First Watch Restaurant Group, Inc. in December 2019. First Watch Restaurant Group, Inc. was founded in 1983 and is headquartered in Bradenton, Florida.

First Watch Restaurant 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. 

FWRG reported revenue of USD 1 056mn in the last 12 months, up 4% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 36% from FY24 to USD 0.23. Market expects EPS to reach USD 0.32 in FY25.

Over the past six months, the stock has consistently fallen, resulting in a 25% total decrease. When measured against its worldwide peers from the same industry (as shown above), the stock has been weaker, underperforming by 17ppts. 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 slightly unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 8.1% in the last 12 months, a decline from 10.3% in FY23. 

Historically, FWRG has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 1.2%, down from 2.8% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 0.9% in the last 12 months, a decrease from 2.1% in FY23. The market analysts predict that RoA will be 1.4% in FY24, again weaker than its peers. 

First Watch Restaurant Group, Inc. reported a return on equity (RoE) of 2.1% in the last 12 months, down from 4.7% in FY23. The market consensus projects an RoE of 3.2% in FY24, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 1.0%, below the peers. The consensus estimate for FY24 for RoCE is 2.5%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.3 in the past several years. This ratio implies a weak 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.

FWRG has above average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to bleak profitability, negligible return on capital, and weak debt servicing capacity. We note resilient historical revenue growth and adequate interest coverage, among the positive credit factors. 

In highly turbulent market conditions, FWRG is moderately volatile. In other words, the stock will fall more than 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 moderate. 

In normal market circumstances, FWRG 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 moderate to notable. 

From both historical and forecast perspectives, the stock is overpriced compared to similar stocks. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITD. 

First Watch Restaurant Group, Inc.

$ 15.77

3

First Watch Restaurant Group, Inc.

$ 15.77

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 15.77

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