3 Things to Know About Cava Group Stock Before You Buy

The restaurant industry is extremely competitive. But that doesn't mean there aren't newcomers entering the market. With its focus on a Mediterranean-inspired menu, Cava Group (NYSE: CAVA) is one example. Investors have been winning lately, as shares are up 43% in the past three months (as of March 9).

This growth stock has a ton of momentum on its side. Here are three things you need to know before you buy.

Image source: Cava Group.

Store growth is the driving force

Cava reported year-over-year revenue growth of 22.5% in fiscal 2025 (ended Dec. 28, 2025). This was after the business posted a 33.1% gain the year before. The top line has no trouble rising.

It's being driven by an aggressive expansion plan. Cava opened 72 net new stores last year. It has plans to open 74 to 76 this fiscal year. And the leadership team believes that by 2032, the company will have a physical footprint of 1,000 restaurants (compared to 439 today). The business is penetrating newer markets, particularly in the Midwest.

As with its peers in the industry, traffic has been under pressure. Cava's same-store sales were up by just 0.5% in Q4. Management believes things will improve this year, as it expects this key metric will increase by 4% (at the midpoint) in fiscal 2026. Cava hopes that customers will keep gravitating toward its health-conscious items.

How quickly can profits rise?

Growth stocks definitely have the ability to produce strong returns. It's easy to remain focused on the top line. But investors in these types of businesses need to see improving profitability.

Cava is showing some promise in this regard. It went from a $53 million operating loss in fiscal 2021 to $55 million in operating income last year. That transition was helped by a 140% revenue gain.

Wall Street analysts expect operating income to increase at a yearly pace of 34% between 2025 and 2028, much faster than the projected revenue growth. That showcases the benefits of greater scale to the business model.

Shares are in nosebleed territory

The valuation is extreme. Shares trade at a price-to-sales ratio double that of Chipotle Mexican Grill, the leader in the fast-casual dining category. The market is pricing in huge expectations.

To add more context to the stock's nosebleed valuation, consider the situation on a unit basis. Each of Cava's restaurants commands $21 million in market cap. Chipotle carries a market cap per store of $11 million. Clearly, there is a lot of optimism being sold in Cava's pitas and bowls.

Investors should proceed with caution. This restaurant stock doesn't look like a smart buy today.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cava Group and Chipotle Mexican Grill. The Motley Fool recommends the following options: short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.