Cava Shares Are Up 243% in 2024. Is the Stock Still a Buy?

Core Insights - Cava Group has experienced significant growth, with shares increasing by 243% year to date, indicating strong market interest and potential for future returns [1] - The company is effectively filling a gap in the restaurant industry by offering Mediterranean cuisine with high performance, achieving a 39% revenue growth year-over-year and an 18% increase in same-store sales [2][3] - Cava's restaurant-level profit margin stands at 25%, comparable to established players like Chipotle, showcasing its ability to generate profits early in its growth phase [7] Company Performance - Cava's net profit more than doubled to $18 million compared to the previous year, with new restaurants exceeding performance expectations [5] - The company had only 352 locations as of October 6, which is significantly smaller than competitors like Chipotle, which has over 3,600 locations [4] Market Position and Valuation - Cava's price-to-sales (P/S) ratio is around 20, which is considerably higher than Chipotle's 7.4, suggesting that Cava shares may be overvalued [8] - Historical context shows that lower P/S multiples, like Chipotle's 1.86 in 2009, allowed for greater returns, indicating that current investors should be cautious about high valuations [9][10]