Sweetgreen (SG +1.70%) has attempted to stand out in the fast-casual restaurant space by emphasizing healthy food. Even though other restaurants, such as Chipotle and Cava Group, emphasize natural ingredients, Sweetgreen more explicitly focuses on health and sustainability and has introduced automation in an attempt to cut costs.
Nonetheless, Sweetgreen stock sells at a fraction of its $28 per share initial public offering (IPO) price from 2021. Knowing that, can Sweetgreen find a way to generate shareholder returns, or is this a stock investors need to avoid?
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The state of Sweetgreen
On the surface, Sweetgreen looks like an intriguing concept. Amid the push for health, customers have turned to meals like salads and protein bowls. Moreover, the company invested in a robotics-based system to make food preparation more efficient.
Unfortunately, this has not translated into gains for the company or its stock. The company planned to open 37 new restaurants in 2025 and had 266 restaurants as of the end of the third quarter of fiscal 2025 (ended Sept. 28).
However, despite that increase, revenue in the first nine months of fiscal 2025 grew by 2% to $524 million. That included a 7% drop in same-store sales over the same period.
Additionally, total operating expenses increased over that time frame, calling into question how well its moves to cut costs have worked. As a result, the $84 million net loss in the first three quarters of 2025 increased from $61 million in the same year-ago period.
The company has responded to its struggles by slowing new restaurant growth to 20 restaurants in 2026. It also holds $130 million in cash and will gain an additional $100 million when it sells its automation unit, Spyce (it still retains licensing to that technology). That buys it time to orchestrate a turnaround.
Unfortunately, the stock has experienced a near-80% price decline over the last year. That has given the company a price-to-sales (P/S) ratio of 1.2.
NYSE: SG
Key Data Points
That is far below the 4.5 sales multiple of Chipotle or Cava's 7.2 P/S ratio. Still, since those competitors earn a profit, one has to question whether such a low sales multiple is enough to rescue Sweetgreen stock.
Can Sweetgreen deliver durable shareholder returns?
Considering the state of Sweetgreen, the prospects for reliable shareholder returns are uncertain. Despite efforts to attract customers and save money, same-store sales are down, and operating expenses continue to rise.
The upside for investors is that its cash position gives it time to turn itself around. Moreover, the low P/S ratio allows more risk-tolerant investors to buy the stock cheaply. Such conditions may make buying Sweetgreen stock palatable as a speculative play.
However, the key words here are "speculative play." Unless Sweetgreen begins showing signs of revived sales growth and a move toward profitability, this is a stock most investors should avoid.
