While the investor reaction to Cava Group's (CAVA +6.40%) fourth-quarter earnings report was relatively muted, the fast-casual Mediterranean-themed restaurant operator continues to put up some of the most impressive results in the restaurant space. The stock has pulled back more than 10% in 2025, although it is still up more than 90% over the past year.
Let's dive into the company's fiscal Q4 results to see if this pullback is a good opportunity to buy this red-hot growth stock.
NYSE: CAVA
Key Data Points
Same-store sales continued to rocket higher
Cava has delivered incredible same-store sales growth recently, and its fiscal fourth quarter was no different. For the period ended Dec. 29, Cava's same-restaurant sales surged 21.2%. The growth was led by a 15.6% jump in guest traffic and a 5.6% increase in price and mix. The company saw its same-store sales growth accelerate throughout the year, with traffic and price both trending higher each quarter.
| Metric | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| Same-store sales growth | 2.3% | 14.4% | 18.1% | 21.2% |
| Traffic | -1.2% | 9.5% | 12.9% | 15.6% |
| Price and mix | 3.5% | 4.9% | 5.2% | 5.6% |
Data source: Cava Group earnings press releases.
The introduction of grilled steak this past summer appears to have really been a game changer for the company. Meanwhile, Cava said its unique value proposition and the quality and relevance of its cuisine have helped drive growth.
Overall revenue for the quarter jumped 28.3% year over year to $225.1 million but would have been up 36.8% if not for the quarter being one week shorter this year. Cava opened 15 new locations in the quarter, bringing its total to 367 restaurants, an 18.8% year-over-year increase. It opened 58 new locations during the year.
Its restaurant-level margins (RLMs) improved 50 basis points to 22.4% in the quarter (when adjusted for the extra week last year) and were 25% for the year, up 20 basis points versus fiscal 2023. RLMs measure the profitability of restaurants before corporate costs and are an important metric in the industry. Its 25% RLMs for the year were just below the 26.7% level of Chipotle Mexican Grill (CMG +4.61%), which has been a gold standard for this metric in the industry.
On the profitability front, Cava's earnings per share (EPS) soared to $0.66 from $0.02 a year earlier, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 60% year over year to $25.1 million.
The company generated $29.9 million in operating cash flow in the quarter and free cash flow of $2.1 million, while it produced $52.9 million in free cash flow for the year. This is an important metric, as it shows that Cava is able to build out its new locations without having to take on debt or issue equity.
Looking ahead, the company projected 2025 same-store sales would rise by between 6% and 8% while RLMs would range from 24.8% to 25.2%. It forecast adjusted EBITDA would be between $150 million and $157 million.
Cava undertook a 1.7% menu price increase in January, which it expects to be the only price increase this year. It's also been using artificial intelligence (AI) video technology in a few locations, which it says has improved digital order accuracy and productivity. It plans a broader rollout this year. The company also plans to continue to lean into menu innovation, social media marketing, and its loyalty program this year to help drive traffic and sales.
The company plans to open between 62 and 66 new locations, which would be about 17% to 18% growth. It will enter several new markets this year, including Pittsburgh, South Florida, and new Midwestern markets such as Detroit and Indianapolis.
Image source: Getty Images.
Can Cava's momentum continue?
Cava's stock is not cheap by traditional metrics. It trades at a forward price-to-earnings (P/E) ratio of nearly 159 and a price-to-sales ratio of 10 based on 2025 analyst estimates.
CAVA PE Ratio (Forward) data by YCharts
However, the company looks a lot like early-stage Chipotle with rapid same-store sales growth and top-notch RLMs. In addition, its average unit volume (AUV) of $2.9 million last quarter is catching up to Chipotle's current $3.2 million AUV.
With only 10% of the locations that Chipotle currently has (367 versus 3,726), Cava has plenty of potential growth ahead of it for the next two decades. It's growing within its cash flow and expanding into new markets, taking a disciplined approach. Last year was an inflection point for it in terms of driving traffic, which bodes well for its future.
I think growth investors can consider the stock for the long term, as its future looks extremely bright.
