Where Will Cava Stock Be in 5 Years?

You can be forgiven if you've never heard of Cava Group (NYSE: CAVA). As of the end of 2024, the company had just 367 restaurant locations and many of these had only recently been rebranded from the Zoës Kitchen name. Therefore, many people still haven't heard of this Mediterranean themed chain of fast-casual restaurants.

However, many investors have heard of Cava stock. The company only went public in 2023 but it's off to a roaring start. Those who invested $10,000 when it went public have nearly $20,000 now.

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CAVA data by YCharts

Cava stock has enjoyed a strong stock market debut thanks to surging sales. The company is opening new restaurants at a fast pace -- it opened 58 in 2024 alone. And same-restaurant sales (a measure of sales growth at locations open at least a year) have skyrocketed. They were up 17.9% and 13.4% in 2023 and 2024 respectively.

Cava's profits have also pleased investors. The company had operating income surpassing $43 million in 2024, up from operating income of less than $5 million in 2023. That's a big jump in its first full year as a public company and it did a lot to instill confidence within the investor community.

For those looking at Cava stock today, it's important to take a long-term view. And that's why I'm looking at where Cava's business could be five years from now.

How big could Cava be in five years?

When same-restaurant sales soar, it's a really good sign for those thinking about the long term. A location that steadily gains traffic the longer it's open suggests that consumers like the food and sales will improve as brand awareness grows. This is why Cava is turning heads.

Cava only expects 6% to 8% same-restaurant-sales growth in 2025, which is a significant slowdown from its growth in recent years. But it's still among the very best growth rates in the industry. Consider that top restaurant company Chipotle Mexican Grill only expects low-single-digit same-restaurant-sales growth in the coming year, as does fellow top restaurant company Wingstop.

Therefore, Cava's slowdown isn't a sign of waning popularity because it's still outperforming other top restaurant companies.

This strongly suggests that Cava continues to increase in popularity with diners, which is good news considering the company's ongoing plans to quickly open new locations. Management aims to have more than 1,000 locations by 2032 and will move toward that goal by opening 62 to 66 new locations in 2025. With its long-term vision and current growth rate, I believe Cava can easily pass 600 locations within five years.

Cava restaurants had $2.9 million in annual average sales volume in 2024. Projecting that this modestly increases annually, as it has in the past, it's possible that the average Cava restaurant could have $3.5 million in annual sales volume in five years.

If Cava had 600 restaurants in 2029 doing $3.5 million in sales on average, the company would generate $2.1 billion in full-year revenue. Assuming between a 5% and 10% margin -- a strong yet attainable number -- the company could have somewhere in the ballpark of $100 million to $200 million in net income.

None of these numbers are guaranteed for Cava and indeed these projections assume a lot of things go right. But it may be fair to assume that things will go well for the company considering how strong its operating metrics have been since the company went public.

Is Cava stock a buy?

As of this writing, Cava's market capitalization is $10 billion. Assuming the company has a $200 million profit in fiscal 2030, it's already trading at 50 times that profit. To be clear, 50 times trailing profits is usually considered expensive for a restaurant stock. Therefore, any value-minded investor would surely stay on the sidelines.

But herein lies a wrinkle for value-minded investors to consider. A lot of things can happen in five years, including good things that were left out of assumptions. Perhaps sales will grow more than expected, either due to increasing popularity or by Cava opening more restaurants than anticipated. Profit margins could also be better than advertised. So maybe Cava stock isn't as expensive as it looks.

Personally, I wonder whether Cava's Mediterranean cuisine will continue to find an audience with greater scale. For this reason, I'm perhaps a little more cautious than some when it comes to its potential size five years from now, which is why I wouldn't buy the stock at its current valuation.

That said, Cava's past financial results are among the very best in the restaurant industry and I can appreciate why investors would be willing to bet on its future upside in spite of its price tag today.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends Cava Group and Wingstop and recommends the following options: short March 2025 $58 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.