CAVA
CAVACAVA Group, Inc.
operates a chain of fast-casual Mediterranean restaurants. The company's identity is built on being a health-conscious culinary brand, leveraging its focus on fresh, customizable bowls and pitas to differentiate itself in the competitive restaurant landscape.
Updated: January 14, 2026, 16:00 EST
Investment Opinion: Should I buy CAVA Today?
Technical Analysis
CAVA exhibits strong short-term momentum with a 30% monthly gain, significantly outperforming the market. However, its extreme volatility (beta of 2.4) and substantial 69.5% maximum drawdown over the past year highlight significant risk. Trading midway between its 52-week low and all-time high suggests room for recovery, but the volatile nature requires a strong risk tolerance.
Fundamentals
Revenue growth remains positive, climbing sequentially to $292 million last quarter, supported by a healthy 37.8% gross margin. Profitability has softened slightly, with net income margin dipping to 5.05%, though the balance sheet is robust with low debt and strong liquidity. Operational efficiency is mixed, with low returns on equity and assets indicating room for improvement in capital utilization.
Valuation
CAVA’s valuation appears stretched, with a forward P/E of 132.9 and a price-to-sales ratio of 7.26 far exceeding typical industry levels. These multiples suggest investor expectations are very high relative to current earnings and sales. The negative PEG ratio further signals that growth may not justify its premium pricing.
Risk
The primary risk is extreme volatility, with the stock being over twice as volatile as the broader market. While balance sheet and liquidity risks are low, the potential for sharp downturns remains significant. Investors must be prepared for substantial price swings.
Investment Recommendation
CAVA presents a compelling growth narrative with strong revenue momentum and a solid financial footing, but it comes with high volatility and a premium valuation. Investors with a higher risk tolerance and a long-term perspective may find appeal in its expansion potential. However, the current price level demands cautious entry, ideally on market pullbacks, to mitigate valuation and volatility risks.
CAVA 12-Month Price Forecast
RockFlow Model Forecast: Three Scenarios for 2026
Based on a comprehensive review, the 12-month outlook for CAVA is cautiously optimistic, driven by growth but tempered by high volatility and valuation concerns.
The primary catalysts will be the company's ability to maintain its impressive revenue growth trajectory and successfully execute its national expansion plans, which could justify its premium valuation over time. Key risks include the stock's extreme sensitivity to market sentiment, given its high beta of 2.4, and any stumble in growth metrics that could trigger a sharp re-rating given its stretched forward P/E of 132.9. Without a specific analyst consensus target, the price action is likely to remain volatile; a reasonable target range would see the stock testing its previous highs near $80-$85 if execution remains strong, but it remains vulnerable to pullbacks towards the $55-$60 level if market conditions worsen or growth slows.
Wall Street Consensus
Most Wall Street analysts are optimistic about CAVA's 12-month outlook, with consensus target around $70.57, indicating expected upside potential.
Bulls vs Bears: CAVA Investment Factors
Overall, CAVA has investment potential but also faces challenges. Here are key factors to weigh before investing.
Bullish
- Analyst Consensus Moderate Buy: Analysts give CAVA a Moderate Buy rating with a $70.75 price target, implying 29% upside.
- Revenue Growth and Menu Innovation: CAVA's revenue growth and menu innovation are strong ahead of Q3 earnings.
- Expansion Plans Boost Confidence: Promising expansion plans have boosted investor confidence, driving a recent stock surge.
Bearish
- Slowing Sales Growth: CAVA is experiencing slowing sales growth at existing locations, pressuring the stock.
- Consumers Visiting Restaurants Less: Higher cost of living is reducing discretionary spending, leading to fewer restaurant visits.
- Valuation Concerns Persist: Analysts warn the stock may be overvalued, with growth optimism not justifying the price.
CAVA Technical Analysis
CAVA has demonstrated significant volatility with impressive short-term gains but remains substantially below its yearly peak. The stock exhibits extremely high beta, indicating it has been about 2.4 times more volatile than the broader market.
Over the past month, CAVA has surged 30.14%, significantly outperforming its modest 5.37% three-month gain; its 2.0% relative strength versus the market confirms this recent outperformance. This suggests strong positive momentum in the very near term, though the three-month performance remains more moderate.
Currently trading at $68.52, CAVA sits approximately 52.6% above its 52-week low but still 52.6% below its all-time high, indicating substantial recovery potential remains. Given the extreme 69.5% maximum drawdown witnessed over the past year, the current price does not appear overbought despite the recent rally, positioning it in a middle ground within its volatile yearly range.
| Period | CAVA Return | S&P 500 |
|---|---|---|
| 1m | +32.8% | +1.3% |
| 3m | +13.6% | +5.7% |
| 6m | -21.2% | +10.6% |
| 1y | -39.0% | +16.5% |
| ytd | +16.6% | +1.1% |
CAVA Fundamental Analysis
Revenue & Profitability CAVA demonstrated sequential revenue growth from Q2 to Q3 2025, with quarterly revenue rising from $280.6 million to $292.2 million. However, profitability metrics showed some weakening as the net income margin declined from 6.55% in Q2 to 5.05% in Q3, primarily due to a significant quarter-over-quarter increase in other expenses. The company maintains a solid gross profit margin of 37.8%, indicating strong pricing power relative to food costs.
Financial Health The company maintains a robust balance sheet with a healthy debt-to-equity ratio of 0.58 and current ratio of 2.69, reflecting strong liquidity. CAVA operates with minimal long-term debt and generates positive operating cash flow, though the cash flow to debt ratio of 0.10 suggests modest cash generation relative to total obligations. The negative cash conversion cycle of -5.85 days indicates efficient working capital management as the company collects from customers before paying suppliers.
Operational Efficiency CAVA shows mixed operational efficiency with a relatively low return on equity of 1.92% and asset turnover of 0.22, suggesting room for improvement in capital utilization. However, the company demonstrates excellent inventory management with an inventory turnover ratio of 21.2 and maintains strong receivables collection efficiency. The fixed asset turnover of 0.36 indicates moderate efficiency in utilizing property and equipment to generate revenue.
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
RockFlow Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
Try Now & Get Tesla Stock RewardValuation Analysis: Is CAVA Overvalued?
Valuation Level Analysis
CAVA appears significantly overvalued based on traditional valuation metrics. Its trailing P/E of 57.99 and forward P/E of 132.9 are exceptionally high, indicating investors are paying a substantial premium for earnings that are expected to decline sharply. The elevated PB ratio of 10.33 and PS ratio of 7.26 further suggest the market price is not well-supported by the company's book value or sales, while the negative PEG ratio underscores concerns about its growth trajectory relative to its high earnings multiple.
Peer Comparison
A direct comparison to industry averages is not possible due to the unavailability of specific industry data. However, the company's valuation multiples are almost certainly trading at a significant premium to broader restaurant or casual dining industry norms. Metrics like a PS ratio above 7 and an EV/EBITDA over 208 are extreme by any standard, strongly suggesting CAVA is valued much more richly than its potential peers.
Investment Risk Disclosure
Volatility for CAVA is exceptionally high, as indicated by a Beta of 2.429, suggesting the stock is over 140% more volatile than the broader market. This extreme sensitivity is evidenced by a one-year maximum drawdown of -69.5%, highlighting significant downside risk and potential for severe capital depletion during market downturns.
While liquidity risk appears muted and short interest is non-existent, the primary other risk stems directly from its inherently high volatility. The lack of short interest may indicate general market optimism, but it does not mitigate the stock's fundamental susceptibility to sharp price swings based on earnings reports or sector sentiment.
FAQs
Of course. Here is a professional assessment of CAVA stock.
Opinion: Neutral to Bearish for most investors.
Core Reasons: 1. Extreme Valuation: The stock trades at exceptionally high multiples (P/E of 132.9, P/S of 7.26), indicating its price is heavily reliant on future growth optimism rather than current fundamentals. 2. Significant Volatility: With a beta of 2.4, CAVA is over 140% more volatile than the market, posing a high risk of sharp drawdowns (evidenced by its 69.5% one-year decline). 3. Mixed Fundamentals: While revenue is growing and the balance sheet is healthy, profitability is weakening, and the company faces headwinds from slowing consumer spending.
Suitable Investor Types: This stock is suitable only for high-risk tolerant, growth-oriented investors who believe the company's expansion plans can justify its premium valuation over a long time horizon. It is generally unsuitable for value investors or those with a low risk tolerance.
Based on the provided data, CAVA stock is significantly overvalued. Its valuation metrics, including a trailing P/E of 58 and a forward P/E of 133, are extremely high compared to typical industry norms for restaurants, which often trade at multiples in the teens or twenties. The negative PEG ratio of -7.1 highlights a severe disconnect between its high earnings multiple and its actual growth prospects. This premium valuation appears unjustified given the company's declining net income margin and modest operational efficiency (e.g., low asset turnover), suggesting the current price reflects overly optimistic growth expectations that are not supported by its fundamentals.
Of course. As a risk management analyst, here is an objective assessment of the key risks of holding CAVA stock, based on the provided information.
Key Risks of Holding CAVA Stock
1. Extreme Market Volatility (Beta/Specific Risk): The stock's exceptionally high beta of 2.43 means it is likely to experience price swings over 140% more severe than the broader market, leading to a high risk of significant capital depletion, as evidenced by its 69.5% maximum drawdown over the past year. 2. Operational Execution and Profitability Risk: While revenue is growing, the company faces pressure on its bottom line, as indicated by the recent quarterly decline in net income margin from 6.55% to 5.05%, suggesting vulnerability to rising operating expenses that could impede profitability growth. 3. Industry and Sentiment Risk: As a relatively new public company in the competitive restaurant sector, CAVA's valuation is highly susceptible to shifts in market sentiment based on quarterly earnings performance and comparable sales metrics, which can drive disproportionate volatility regardless of its solid financial health. 4. Valuation and Momentum Risk: The stock's recent surge of over 30% in one month, while still trading significantly below its all-time high, creates a risk of a sharp pullback if the current positive momentum falters or if growth expectations priced into the stock are not met.
Of course. Here is a professional forecast for CAVA Group, Inc. (CAVA) through 2026.
***
CAVA Stock Forecast: 2026 Outlook
Based on a balanced assessment of growth catalysts and significant risks, our 2026 price target for CAVA is $85 - $115.
1. Target Price Range: * Base Case ($85): Assumes continued strong unit expansion and solid same-store sales growth, but with margin compression from competitive pressures and inflationary costs. This scenario aligns the valuation closer to high-growth restaurant peers. * Bull Case ($115): Requires flawless execution on national expansion, significant acceleration in unit economics, and CAVA successfully establishing itself as a dominant lifestyle brand, justifying its current premium valuation.
2. Key Growth Drivers: * National Unit Expansion: The primary driver will be the successful rollout of new restaurants beyond its current regional footprint, capturing a larger addressable market. * Brand Momentum & Market Share Gains: The ability to leverage its "better-for-you" Mediterranean positioning to take share from both traditional fast-casual and quick-service restaurants. * Operational Scalability: Improving profitability per unit as the company achieves greater scale in its supply chain and marketing spend.
3. Main Assumptions: * Revenue growth sustains above 20% annually through new unit openings and positive comps. * The company manages to gradually improve net income margins towards 10% as it scales. * Macroeconomic conditions remain stable, supporting consumer discretionary spending.
4. Uncertainty & Risks: * This forecast carries high uncertainty. CAVA's extreme valuation (P/E >130) makes it highly sensitive to any disappointment in growth metrics or a shift in market sentiment away from hyper-growth stories. Execution missteps in expansion or increased competition pose significant downside risks.