Shares of Cava Group (CAVA +1.70%) surged after the Mediterranean-themed restaurant operator issued upbeat guidance with its fourth-quarter earnings report. The stock is up more about 45% year to date but still down about 15% over the past year.
Let's dig into the company's latest results and prospects to see if the stock's momentum can continue.
NYSE: CAVA
Key Data Points
An upbeat outlook
2025 was a difficult year for Cava stock, with its shares getting nearly cut in half. The biggest reason for this was that its same-store sales growth slowed dramatically starting in Q2. However, that was largely due to the lapping of the introduction of its highly popular grilled steak option in 2024.
With those tough comparisons now behind the company, it forecasted 3% to 5% comparable-restaurant sales growth for 2026. That's a nice jump compared to the last three quarters of 2025, which ended with it only reporting a 0.5% increase in Q4.
Overall revenue for Q4 climbed 21% year over year to $272.8 million. It opened 24 new restaurants in the quarter, bringing its total to 439 locations, a nearly 20% increase compared to a year ago.
After entering a few new Midwest markets in 2025, the company continues to expand in the region, with planned openings in Cincinnati, St. Louis, Columbus, and Minneapolis in 2026. Overall, it is looking to open between 74 and 76 new locations in fiscal 2026. Its goal remains to reach at least 1,000 restaurants by 2032.
Its restaurant-level margins (RLMs) came in at 21.4% in the quarter, down from 22.4% a year ago, and were 24.4% for the full year. RLMs measure how profitable a chain's individual restaurants are before corporate costs. It expects a 2026 RLM of between 23.7% and 24.2%.
On the profitability front, Cava's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 3% year over year to $25.8 million. The company also generated $184.8 million in operating cash flow for the year and free cash flow of $26.1 million.
Image source: Getty Images.
Is the stock still a buy?
Cava has robust average unit volumes (AUVs) of nearly $3 million with strong RLMs, as it uses a similar strategy to Chipotle, with minimal ingredients that can be used in a multitude of combinations. Meanwhile, with fewer than 450 locations, it has one of the best expansion stories in the restaurant industry, as it moves into new markets and infills existing ones.
Given the expansion opportunity still in front of it, Cava is an interesting growth story. However, after this surge, I think the stock has gotten way ahead of itself. It has a market cap of $9.8 billion and 439 locations. That's valuing each of its locations, which average just under $3 million in yearly sales, at $22.3 million per restaurant location. That's way too high.
