Shares of daytime diner First Watch Restaurant Group (FWRG 6.07%) are down 13% as of 11 a.m. ET on Tuesday after the company reported fourth-quarter earnings. While the market's reaction to First Watch's Q4 earnings and guidance was adverse, I think it may be an overreaction. The company's 20% sales growth matched Wall Street's expectations, and its earnings per share of $0.24 tripled analysts' expectations. For the full year, First Watch grew its store count by 11% and delivered same-store sales (SSS) growth of 3.6%.
NASDAQ: FWRG
Key Data Points
Despite these exceptional figures, the company's conservative guidance worried the market. Management guided for 2026 revenue growth of 12% to 14%, while SSS would increase only 1% to 3% -- both declines from 2025. Similarly, the company guided for its store count to grow 9%, compared with historical double-digit growth. Noting this soft guidance, Chief Executive Officer Chris Tomasso explained, "I do think that the entire category has reason to be cautious here in February about what's gonna ensue for the balance of the year." While consumer spending remains weak, First Watch has held up well in this pressured environment. Black Box Intelligence estimated that same-store traffic declined 1.9% in 2025, but First Watch delivered 0.5% same-store traffic growth, continuing its long-term outperformance on this metric.
Image source: Getty Images.
From a 1,000-foot view, there is still a lot to like about First Watch, as well. Its focus on operating only from 7 a.m. to 2:30 p.m. is unique and only requires one shift per day across its employee base. This differentiation streamlines operations and keeps employees happy, as evidenced by First Watch landing on Glassdoor's 2026 25 Best Places to Work in Consumer Services list. From a food perspective, First Watch continues to receive accolades left and right, recently landing at No. 4 on Yelp's Most Loved Brands of 2025 -- an impressive feat for the up-and-coming daytime-only diner.
Today, First Watch has an alluring Enterprise Value to Cash From Operations ratio of 15 -- compared to Texas Roadhouse's 16 -- especially considering the former's outsize growth potential. I'll be watching this daytime diner closely.
