As of this writing, Cava Group's (CAVA 10.50%) share price is about 127% higher than the $22 it debuted at for its initial public offering (IPO) a month ago. To say that investors are excited about the Mediterranean-focused fast-casual chain would clearly be an understatement. 

But does this restaurant stock have a chance to be worth more than Chipotle (CMG 2.41%) by 2040? Cava's current market capitalization of $5.7 billion would have to rise roughly tenfold over the next 17 years, translating into an annualized return of 14.5%. 

Let's look at Cava's investment merits and discuss why this outcome is a long shot. 

A new fast-casual rival 

The excitement surrounding this IPO stock is understandable. Cava has expanded its store base at a rapid clip. As of April 16, the chain had 263 locations, up from 22 at the end of 2016. Management, led by co-founder and CEO Brett Schulman, thinks there can be 1,000 stores by 2032. 

That target might seem outlandish at first glance. But when you consider the U.S. limited-service restaurant industry's 2021 sales volume of $325 billion, it's not so crazy. Cava generated $449 million of revenue in 2022, a tiny fraction of the overall industry. The leadership team also believes broad consumer trends -- like a heightened interest in ethnic foods and a focus on health and wellness -- can be nice tailwinds for the business. 

Cava has also posted incredible same-store sales growth, to the tune of 28.4% in the first quarter of 2023 compared to the year-ago period. And in the 16-week period that ended April 16, its net loss was $2.1 million, a huge improvement from the $20 million net loss it posted in the prior-year period. This shows that the company is heading in the right direction in terms of achieving profitability. 

If Cava expands beyond management's wildest goals, having a massive store footprint and outsize profits, then maybe its market cap can reach the $57 billion that Chipotle is at today. But clearly, a lot of things need to go right along the way, so there is still a ton of execution risk. 

Chipotle still dominates

In order for Cava to be worth more than Chipotle by 2040, it would have to achieve tremendous success. But this also implies that Chipotle's market cap would be the same in 17 years as it is right now. I don't think anyone believes that this will be the case. 

As I noted earlier, Cava's management team thinks there can be 1,000 stores by 2032. Chipotle, which has 3,224 locations (as of March 31), could one day have 7,000 stores in North America, according to the management team. The popular Tex-Mex chain still has a huge growth runway from this point forward. 

And with more stores, Chipotle's bottom line is set to expand even further. The company's operating margin increased from 5.4% in 2017 to 13.6% in 2022. With more locations and more sales per store, the business will be able to continue leveraging its fixed costs, leading to better profitability over time. 

A valid argument could be made that Chipotle's stock, currently carrying a price-to-earnings ratio of 56, is overvalued. After all, it has soared 354% in the last five years. So by 2040, its valuation multiple will surely have to contract significantly, right? Even if this did end up happening, Chipotle's revenue and earnings will probably be significantly higher 17 years from now, resulting in the market cap being far greater. 

Temper expectations 

Cava currently trades at a price-to-sales (P/S) multiple of 7.8, so it's evident that the optimism about its growth potential is more than reflected in the stock price. For comparison's sake, Chipotle sells at a P/S ratio of 6.5. 

Investors who believe in Cava's prospects might still want to take a bite out of the stock right now, but only if they truly believe in the company's long-term prospects. However, if you really think that it can one day eclipse Chipotle's valuation, I think it's best to temper expectations.