The Ultimate Guide to Investing in Cava Group for Maximum Returns

Source The Motley Fool

Shares of Cava Group (NYSE: CAVA) have risen by more than 150% over the past year. That's great if you own the stock, but you can't expect that performance to continue indefinitely. And that is why you need to step back, as a new investor or an existing one, and think about the company's growth potential and the best way to track its ongoing success or failure.

Here's what you need to know to guide your thinking about Cava Group if you want to maximize returns and minimize risk.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

What does Cava do?

From a big-picture perspective, there's nothing particularly special about Cava, which is just a fast-casual restaurant chain. A lot of restaurants fall into this category. However, it is pretty clear that investors are enamored with Cava right now, given the rapid stock price advance. There are likely two reasons for this phenomenon.

People eating on a table with CAVA logo in view.

Image source: Cava Group.

First, Cava is doing quite well right now, financially speaking. Revenue, for example, increased a heady 39% year over year in the third quarter of 2024. Earnings rose to $0.15 per share from $0.06 in the year-earlier period. You can see why investors would be enthusiastic about the stock, but what is really going on here?

The growth opportunity at Cava

Essentially, the big story at Cava is that it is opening new locations at a rapid clip. This is the second reason to be enthusiastic about the company's prospects. In the third quarter of 2024, the company opened 11 new stores. That doesn't sound like a big number, but the company operated only 352 locations at the end of the quarter (up a massive 21% year over year). It expects to end 2024 with a total new-store count of up to 58 locations.

CAVA Chart

CAVA data by YCharts

New locations add materially to the top line, so this is a very effective way to grow the company's business and enhance financial results. But how much can Cava Grow? That's the exciting part, since its business model is very similar to that of Chipotle Mexican Grill, the fast-casual chain that operates over 3,600 locations worldwide. This is more than 10 times as many as Cava, suggesting that Cava has years' worth of growth potential.

Make sure Cava is growing without sacrifice

The ultimate issue for investors here, however, is whether Cava can grow without compromising its business performance. Wall Street is littered with the husks of restaurant concepts that pushed so hard to grow that they lost sight of their existing stores. This is why same-store sales is the second number you'll want to track like a hawk. Basically, same-store sales data tells you how well stores that have been open for at least a year have been performing.

Right now, Cava's same-store sales are flying high, with the third quarter's figure coming in at a lofty 18.1%. This suggests that the Cava concept is resonating well with customers. However, 18.1% isn't sustainable over the long term in an industry where low single digits is usually considered pretty good. So look for the figure to fall off at some point. But if Cava can keep opening new locations while keeping same-store sales in positive territory, there is likely to be a lot more growth ahead for this still-small restaurant chain.

Cava has to perform a balancing act

Cava's stock is expensive right now, with a price-to-earnings ratio of a somewhat outlandish 280. A lot of good news is priced into the stock at this point. Now, it has to maintain both new-store growth and same-store sales growth. If you want to maximize your returns, you'll want to be laser-focused on both metrics.

Should you invest $1,000 in Cava Group right now?

Before you buy stock in Cava Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cava Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $902,242!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Learn more »

*Stock Advisor returns as of January 21, 2025

Reuben Gregg Brewer 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 recommends the following options: short March 2025 $58 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
What Crypto Whales are Buying For May 2025Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
Author  Beincrypto
Apr 21, Mon
Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
placeholder
Gold price snaps selling off after fresh Trump comments on tariffsGold price (XAU/USD) is turning positive, recovering above the $$3,300 level at the time of writing on Thursday after two days of firm selling pressure since it topped at $3,500 on Tuesday.
Author  FXStreet
Apr 24, Thu
Gold price (XAU/USD) is turning positive, recovering above the $$3,300 level at the time of writing on Thursday after two days of firm selling pressure since it topped at $3,500 on Tuesday.
placeholder
Gold price surges past $3,300 on trade jitters, yield slump reviving haven demandGold price snapped two days of losses on Thursday and rose $50, or more than 1.50%, amid renewed concerns about the US-China trade war.
Author  FXStreet
Yesterday 03: 51
Gold price snapped two days of losses on Thursday and rose $50, or more than 1.50%, amid renewed concerns about the US-China trade war.
placeholder
Gold price consolidates in a range; bulls have the upper hand while above $3,300Gold price (XAU/USD) struggles to capitalize on the previous day's move higher and oscillates in a narrow trading band during the Asian session on Friday amid mixed fundamental cues.
Author  FXStreet
Yesterday 03: 53
Gold price (XAU/USD) struggles to capitalize on the previous day's move higher and oscillates in a narrow trading band during the Asian session on Friday amid mixed fundamental cues.
placeholder
Gold edges down amid clash over status of US-China trade talksGold price is on the back foot on Friday, almost erasing all of Thursday’s gains, and looks set to close off this week in the red.
Author  FXStreet
20 hours ago
Gold price is on the back foot on Friday, almost erasing all of Thursday’s gains, and looks set to close off this week in the red.
goTop
quote