Down 44%, Is It Time to Buy This Growth Stock?

Cava (NYSE: CAVA) has been 1 of the astir awesome stories successful the edifice manufacture lately.

After getting disconnected to a shaky commencement aft its June 2023 IPO, the banal soared done overmuch of 2024 arsenic it delivered blockbuster results with accelerated maturation connected the apical enactment and expanding margins connected the bottommost line, indicating beardown request for the Mediterranean fast-casual chain's fare.

Cava conscionable capped disconnected a twelvemonth with 35.1% gross maturation to $954.3 million, driven by 58 caller edifice openings and same-store income maturation of 13.4%. Average portion volumes, oregon mean income per store, roseate from $2.6 cardinal to $2.9 million, showing that caller stores are delivering beardown results and that comp income are having an impact. That led to a surge successful profits, with adjusted net earlier interest, taxes, depreciation, and amortization (EBITDA) rising 71% from $73.8 cardinal to $126.2 million.

Despite the beardown caller results, the banal has fallen aft each of its past 2 net reports, and is present down 44% from its peak. Is the banal a buy? Let's instrumentality a look astatine what Cava has to connection investors today.

Cava's way grounds is surely impressive, but the question for investors astatine this constituent is if it tin support up that growth, arsenic stocks are valued based connected aboriginal currency flows.

Looking to 2025, Cava's guidance called for a slowdown successful comparable income maturation to 6%-8%. It besides forecast 62-66 edifice openings, and adjusted EBITDA of $150 million-$157 million, oregon 22% maturation astatine the midpoint. Management sees a restaurant-level nett borderline of 24.8%-25.2%, which is level compared to 25% successful 2024.

Investors should instrumentality that forecast with a atom of salt, arsenic archetypal guidance for the afloat twelvemonth is often conservative, particularly for a maturation banal similar Cava. After all, absorption wants to marque definite it tin deed those numbers. The worst happening that tin hap to a maturation banal is for it to chopped its full-year guidance.

However, determination is crushed to judge that Cava tin apical that forecast and proceed to present beardown maturation for years to come.

First, the institution easy topped its archetypal 2024 guidance. A twelvemonth ago, absorption was calling for comparable income of conscionable 3%-5%, adjusted EBITDA of $86 million-$92 million, and restaurant-level nett borderline of 22.7%-23.3%. It easy bushed each of those numbers.

The institution is besides bringing beardown momentum into the caller year, arsenic comparable income jumped 21.2% successful the 4th quarter, indicating it should beryllium capable to commencement 2025 with beardown comparable-sales growth, arsenic it would beryllium antithetic for that maturation to vanish successful 1 quarter. Additionally, Cava inactive has a batch of country for growth, finishing the 4th with 367 locations nationwide. According to its forecast, it volition turn its store basal by 18% this year, and the institution expects to person astatine slightest 1,000 restaurants by 2032, tripling its store count.