Should You Reconsider Chipotle Mexican Grill? Why You Might Want to Buy This Unstoppable Growth Stock Instead.

Chipotle Mexican Grill (NYSE: CMG) is a restaurant giant today, viewed as a go-to option for consumers who like fresh food prepared just the way they like it. There's nothing inherently wrong with the business, but if you are a growth investor there's another option that might be even more attractive to you.

That option is Cava Group (NYSE: CAVA). Here's why you might want to make the switch.

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Chipotle Mexican Grill leads the way

One of the biggest selling points of Chipotle's restaurant concept is the way the food it makes is prepared and delivered. First off, the food is largely cooked in an open kitchen so customers can see that it is fresh. Second, the food is delivered via an assembly line approach driven by the customer's own selections. Thus, the food a customer gets at the end of the line is highly customized.

Image source: Getty Images.

This has proven to be a very attractive food concept, and other companies do the same thing. But Chipotle's success with the approach is nothing short of impressive. At the end of 2005 it operated 481 restaurants in 21 states. It held its initial public offering (IPO) in January 2006. By the end of 2024, it was operating more than 3,700 restaurants around the world.

The stock price has grown along with the company, having risen over 5,500% since its IPO -- even after a recent, steep drawdown. The key to the story is really the combination of a good food concept and store growth. That's what you'll get from Cava, too, if recent trends continue, but Cava only operates around 367 restaurants. That's even fewer than Chipotle had when it went public.

Cava is hitting it out of the park today

From a business model perspective, Cava and Chipotle have a lot in common. Cava basically follows the same exact cooking and preparation approach, only instead of making Mexican food it makes Mediterranean cuisine. That isn't a small difference, since some food concepts resonate better than others with consumers. However, Cava's financial results suggest people really like Mediterranean food.

In 2024, the company's revenue grew a huge 33%. That's an incredible number and was largely driven by the opening of 58 new stores. However, same-store sales, which measures results at stores open for at least a year, came in at 13%. Low-single-digit growth is normally considered pretty good for a restaurant, so Cava's food concept is clearly resonating well with consumers right now. Or, to put that a different way, customers are coming back for more.

With plans for opening as many as 68 new locations in 2025, Cava's business is set for more growth in the year ahead. And if you compare the size of the business to that of Chipotle, well, there could be a very long growth runway here.

There's just one problem with Cava (and Chipotle)

Wall Street is not ignorant to the success that Cava and Chipotle are achieving with their businesses. Chipotle's price-to-earnings ratio is a lofty 43 even after losing around 30% of its value from its recent peak. Cava's share price is off even more, having dropped nearly 45%, and its P/E ratio is an even higher 76. These are both expensive stocks.

If you are looking at Chipotle and have a growth bias, however, you might not mind paying up for Cava. Given its smaller size, it has the opportunity to grow more quickly than larger Chipotle. It will have to grow into its valuation, of course, but given the long-term success that Chipotle has achieved, that's hardly an unreasonable expectation.

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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.