Cava is nearing the 1-year mark since its IPO and needless to say, it’s gotten plenty of attention as being the next Chipotle (CMG). I originally covered the name last year which you can find below.
Because of this comparison to Chipotle, the valuation of the company has reached stratospheric levels with many bulls consistently finding reasons to bid it up. However, the market is bidding up Cava's valuation ( 97x ‘24 EBITDA) despite its inferior AUV and restaurant-level margins.
Given the unit economics of the business, I was curious to see how it stacked up against other notable players on a per-unit basis. Even though I first tweeted about this on June 3rd via my Twitter, I added some more metrics that I think are helpful to the everyday investor.
Source: Company financials.
Looking at the above, I wanted to look at the total enterprise value of each company with respect to the total number of units, AUV, and restaurant-level EBITDA.
Without needing to reiterate the squared-off parts of the above chart, it’s easy to see that even though CAVA is inferior in every way to Chipotle besides YoY unit growth, it’s trading at the highest level to its peers.
The market it valuing CAVA at 4 turns higher on a per unit basis than Chipotle right now.
I’m not labeling this as grounds for a potential short position but rather I’m sharing this with you all to put the valuation in a different kind of perspective.
If you’re long or short the name and have some feedback, I’d love to hear it below.
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