Cava Group (CAVA 10.50%) launched its IPO at a fortuitous time. At the time of the June 15 IPO, the S&P 500 had gained 19% for the year. A few stocks more than doubled during that time, and many analysts declared a "new bull market."

Time will tell whether the increases continue for Cava, or the market in general. Nonetheless, investors might gain some insight by looking closely at the restaurant stock in a potential bull market.

Cava's bull market

Investors should first acknowledge that Cava is in a bull market of its own. The company offered shares at $22, and investors immediately took the stock higher. Those fortunate enough to buy at the $22 per-share price have already seen returns more than double from that level.

So successful was this IPO that investors have already begun making comparisons to Chipotle (CMG 2.41%). Chipotle, which coincidentally launched at $22 per share in 2006, has seen its returns rise by almost 95-fold in its 17 years of existence.

Moreover, like Chipotle, Cava has targeted the health-conscious consumer seeking fast, healthy food. To this end, it offers Mediterranean dishes made with fresh ingredients. Cava claimed 263 locations on April 16, a small fraction of the approximately 3,200 Chipotle restaurants as of March 31. If Cava somehow reached such a size, the stock would probably make massive gains.

Cava could fall short of Chipotle

Unfortunately for Cava bulls, such a milestone does not appear likely, as key differences emerge upon closer inspection.

For one, Cava believes its Mediterranean concept could grow to 1,000 locations by 2032. Since that would approximately quadruple the company's restaurant count, it stands an excellent chance of beating the indexes in a bull market. Still, that is a level considerably smaller than Chipotle's current footprint, indicating a likely underperformance compared with that restaurant.

Additionally, Chipotle operates in the Mexican food market, which has always been among the most popular cuisines in the U.S. and certainly a more popular option than Mediterranean fare. In light of its success, Chipotle is aiming much higher, believing it can grow to 7,000 locations in the U.S. alone.

Furthermore, Cava has lagged behind Chipotle's revenue growth rate at times. Indeed, in the first 16 weeks of fiscal 2023 (ending April 16), Cava's revenue of $203 million rose 28%. But in fiscal 2022 (ended Dec. 25), revenue rose by just 13%. In contrast, Chipotle's Q1 revenue grew 17%, but its 2022 revenue rose 14%, slightly outperforming Cava.

Furthermore, in both the first 16 weeks of fiscal 2023 and fiscal 2022, operating expenses exceeded revenue. This led to losses during times when Chipotle earned a profit. Admittedly, the $2 million loss in the first 16 weeks of fiscal 2023 may be close enough to a profit to continue attracting new investors, but reaching a positive net income could take time.

Cava in a bull market

Cava is posting the growth and expansion potential needed to beat the S&P 500, especially in a bull market. This scenario looks likely, because quadrupling the company's store footprint over the next nine years should take the stock much higher.

However, Cava's most significant obstacle may be convincing investors to choose it over Chipotle. Cava's food niche does not match the popularity of Chipotle's, and it does not always exceed the revenue growth of the Mexican food giant. While Cava should remain an attractive choice for some investors, its business performance in comparison to Chipotle's high-octane growth could hamper the stock's long-term gains.