Is CAVA Group Stock Price Justified After Recent Rebound Despite Steep 52% Annual Drop

• Wondering if CAVA Group at around $56 a share is a hidden opportunity or just an overhyped growth story? Let us unpack what the current price is really implying about the company.
• In the short term, the stock has bounced, with a 5.4% gain over the last week and 23.2% over the last month, even though it is still down roughly 51.3% year to date and 52.9% over the past year.
• That swing in sentiment has come as investors digest CAVA's rapid store expansion and its positioning as a fast casual brand in a still evolving dining landscape. Coverage has increasingly focused on whether its growth story can justify the pace of new restaurant openings and the premium being placed on comparable-store sales momentum.
• Right now CAVA scores just 1/6 on our valuation checks. This means it only looks undervalued on one of the six metrics we track. In the next sections we will walk through those valuation approaches in detail and then finish with a way of thinking about value that goes beyond the usual price multiples and models.

CAVA Group scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: CAVA Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting its future cash flows and then discounting them back to today, to see what that stream of cash is worth in present dollar terms.

For CAVA Group, the model starts with last twelve months Free Cash Flow of about $8.1 million and uses analyst forecasts for the next few years, then extrapolates further out. On this basis, Simply Wall St projects Free Cash Flow rising to roughly $352 million by 2035, with intermediate steps such as around $51 million in 2026 and $195 million in 2029. These future cash flows are discounted using a 2 Stage Free Cash Flow to Equity approach to account for risk and the time value of money.

Putting these pieces together, the DCF model arrives at an intrinsic value of about $38.19 per share. Compared with the current market price around $56, this implies the stock is roughly 46.7% overvalued on a pure cash flow basis.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests CAVA Group may be overvalued by 46.7%. Discover 918 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for CAVA Group.

Approach 2: CAVA Group Price vs Earnings

For a profitable business like CAVA Group, the Price to Earnings (PE) ratio is a useful way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, companies with stronger and more reliable growth prospects, and lower perceived risk, tend to justify a higher PE, while slower growing or riskier firms should trade on a lower, more conservative multiple.

CAVA currently trades on a PE of about 47.3x, which is roughly double the broader Hospitality industry average of 23.5x and still below the 67.5x average of its faster growing peers. Simply Wall St also calculates a proprietary Fair Ratio for CAVA of 16.0x, which is the PE you might expect once you factor in its earnings growth outlook, profit margins, industry, market cap and risk profile.

Compared with simple peer or industry comparisons, this Fair Ratio is more tailored to CAVA’s specific fundamentals and risk, rather than assuming all companies deserve similar multiples. With the current PE of 47.3x sitting far above the 16.0x Fair Ratio, the stock screens as expensive on an earnings multiple basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1460 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your CAVA Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, an easy tool on Simply Wall St’s Community page that lets you attach your own story about CAVA Group’s future revenue, earnings and margins to a forecast and a Fair Value. You can then automatically compare that Fair Value with the current share price to help decide whether to buy or sell. The system keeps updating your Narrative whenever new news or earnings arrive. This means one investor might build a bullish CAVA Narrative around strong demand, efficiency gains and a Fair Value close to the highest analyst target of about $125 per share, while another could create a more cautious Narrative that stresses saturation and margin risk, with a Fair Value nearer the lowest target around $72 per share.

Do you think there's more to the story for CAVA Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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