Simple Valuation of CAVA

(pls note: this is a simple valuation of cava. i like this company because i see a strong similarity to early cmg: (1) strong guidance and financial backing from industry heavyweights (2) CMG took 13 years to each 500 restaurants, CAVA took 15 years to each 460 restaurants. And the original founder is still running the company. Disclosure: i don't own any shares, yet but it is on my watchlist)

The following format is used across all my simple valuations:

1. Share price: $80.42, Market Cap: 9b, Revenue: 1.29b 2. TTM earnings: 0.52, normalised EPS: 0.57, Zack's: 0.52. 2025 eps: 0.54 3. Yield (dividend): - . (Sharebuyback) : - 4. ROA, ROE, ROIC: 5.04%, 8.64%, 4.35% 5. P/E: 154.65, (normalised p/e): 141, Forward P/E : 169 6. D/E: 0.60, Net debt / ebitda: 1.27 years 7. Past growth:

|YOY Growth %|Quarterly TTM|12/2025|12/2024|12/2023|12/2022| |:-|:-|:-|:-|:-|:-| |Revenue|32.08%|22.41%|32.25%|29.17%|12.81%| |Operating Profit|56.17%|30.18%|93.97%|—|—| |Net income|-8.33%|-51.09%|881.32%|—|—| |EPS|-9.09%|-50.91%|423.81%|—|—|

1. Manual calculation: skip

2. Is FCF / EPS > 80% ? No. Not consistent and in aggregate < 80%。 Deshalb we can't use Adj EPS as a proxy for FCF.

3. Management Guidance for 2026: 75 to 77 new restauants, same store sales (SSS) growth of 4.5% to 6.5%, profit margin at 23.7 to 24.3% and adjusted ebitda is 181 to 191m

4. Forward guidance by various websites

|EPS Estimates for CAVA|CAGR next 5yrs|2030 EPS est| |:-|:-|:-| |argus|20%|-| |refinitiv|24.40%|1.6| |zacks|26.80%|1.8| |dcf|27.51%|1.82| |sa|24-27%|-| |market-screener|25%|-| |||| |Reveue Estimates for Cava|CAGR next 5yrs|2030 Rev Est| |dcf|20.83%|3021m| |sa|20.32%|3010m| |market-screener|22.85%|-|

1. Fair Value calculation

Cava is at the "fast grower" stage in the business cycle , and as such it is prioritising sales growth and land-grab over profit. Their stated aim to grow to 1000 restaurants within 7-8 years time. But I think this is a red herring, and management is purposely setting themselves a low sales target; Chipotle took 30 years to reach 3000 restaurants in 2022 and then they upped their target to 7000 with international expansion. (All that before the CEO quit suddenly to join Starbucks).

If Earnings is purposely supressed in favor of Sales then we should use a sales-based valuation metric.

The second issue is, how do we measure sales when we only have 3 years of public data for sales growth (Cava ipo-ed in june 2023) ?

|Cava|2023|2024|2025|Current| |:-|:-|:-|:-|:-| |Price / Sales|3.68|14.52|6.14|7.39|

In Relative Valuation, the reference point can be the historical P/S metric of the company ("What was it priced at previously") , the peer/industry P/S metric ("How much are they priced at right now?") or historical peer/industry ("How much were they priced at historically?"). Since Cava and CMG are quite similar and since CAVA's past history is short, it would be easier to simply base the reference on CMG especially since we have P/S data available all the way from 2006.

|CAVA Relative Valuation|High|Low| |:-|:-|:-| |Chipotle Historical Price / Sales|6|4| |Present Cava Sales / Share|1180m/118m = 10|10| |Implied Relative Value now|$60|$40| |Sales per share by 2030|3021m/118m = 25.6|25.6| |Implied Relative Value in 5 years|$153.5|$102|

Note: Shares outstanding has been at 118 for the past few years, so i did not adjust it. If it changes or management makes some general comments about buybacks and SBC, we may have to adjust for it.

Note: CMG had an average P/S of around 3.96 for the whole thirty years (with smoothing), and around 5.19 for the last ten years, 5.8 for the last five years with morningstar data and P/S of 6 from Refinitive for the last five years. So i use 4 to 6.

Conclusion:

I conclude that Cava is valued at $40-60 today, and $102-153 in five years time. If I were to buy it at today's price of $80.42 and hold it for five years, the rate of return would be between 5% to 13.8% a year.

Morningstar has a quantitative Q fair value of $67.29 for CAVA and CFRA has the fair value at $49.96

(FYI: i did a super conservative "unit level manufacturing" valuation model based on A ( what the 459 current restaurants are earning today) + B (what are restaurants going to earn they will deploy in the future based on 3000 units) - C (SG&A). And i totally did away with terminal growth. The fair value was around 35 to 42. This is a super conservative model which does away with terminal value )