CAVA (CAVA)

Mediterranean fast-casual restaurant chain CAVA (NYSE:CAVA) met Wall Streets revenue expectations in Q3 CY2025, with sales up 19.9% year on year to $292.2 million. Its non-GAAP profit of $0.12 per share was in line with analysts’ consensus estimates.

Company Overview

Starting from a single Washington, D.C. location, CAVA (NYSE:CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.

Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.

Competitors offering similar menus and service models include Chipotle (NYSE:CMG), Sweetgreen (NYSE:SG), and Noodles & Company (NASDAQ:NDLS).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.13 billion in revenue over the past 12 months, CAVA is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, CAVA’s sales grew at an incredible 24% compounded annual growth rate over the last four years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.

This quarter, CAVA’s year-on-year revenue growth was 19.9%, and its $292.2 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 21.7% over the next 12 months, a slight deceleration versus the last four years. Despite the slowdown, this projection is noteworthy and implies the market is baking in success for its menu offerings.

Number of Restaurants

A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.

CAVA operated 415 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 18% annual growth, much faster than the broader restaurant sector. This gives it a chance to become a large, scaled business over time.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.

CAVA has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 10.3%. This performance along with its meaningful buildout of new restaurants suggest it’s playing some aggressive offense.

In the latest quarter, CAVA’s same-store sales rose 1.9% year on year. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if CAVA can reaccelerate growth.

We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate pricing power and differentiation, whether it be the dining experience or quality and taste of food.

CAVA has great unit economics for a restaurant company, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 37.6% gross margin over the last two years. That means CAVA only paid its suppliers $62.40 for every $100 in revenue.

CAVA’s gross profit margin came in at 37.8% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as ingredients and transportation expenses) have been stable and it isn’t under pressure to lower prices.

CAVA’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 4.6% over the last two years. This profitability was lousy for a restaurant business and caused by its suboptimal cost structure.

Analyzing the trend in its profitability, CAVA’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, CAVA generated an operating margin profit margin of 5.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, CAVA reported adjusted EPS of $0.12, down from $0.15 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects CAVA’s full-year EPS of $0.55 to grow 17.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

CAVA has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 3.9% over the last two years, slightly better than the broader restaurant sector.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although CAVA has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 5.3%, meaning management lost money while trying to expand the business.

CAVA reported $284.6 million of cash and $433.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $152.1 million of EBITDA over the last 12 months, we view CAVA’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $15.42 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. CAVA's same-store sales fell slightly short of Wall Street’s estimates. Its full-year same-store sales growth was lowered, reflecting dampened topline expectations. The company's full-year EBITDA guidance also missed. Overall, this was a softer quarter. The stock traded down 4.2% to $49.50 immediately following the results.

Updated: December 4, 2025 at 9:45 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

CAVA has a few positive attributes, but it doesn’t top our wishlist. First off, its revenue growth was exceptional over the last four years. And while CAVA’s declining EPS over the last two years makes it a less attractive asset to the public markets, its marvelous same-store sales growth is on another level.

CAVA’s P/E ratio based on the next 12 months is 94.8x. This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $67.79 on the company (compared to the current share price of $54.51).