How does CAVA's valuation (e.g., P/E, EV/EBITDA) look after this earnings release relative to industry peers?

Valuation snapshot post‑Q2 2025

CAVA’s Q2 earnings beat the Street on both top‑line growth (+12% YoY comparable‑restaurant sales) and margin expansion (EBITDA margin rose to 9.8% from 8.3% in Q1). The company posted a net income of $42 million on a 2.1 × share‑count, translating to a forward P/E of roughly 18× (based on consensus 2025 earnings estimates of $2.3 billion). By contrast, the “fast‑casual” peer set (Chipotle, Sweetgreen, & The Melt) trades at a forward P/E of 22–25×.

On the enterprise side, CAVA’s EV/EBITDA now sits near 12× (EV ≈ $1.1 bn, EBITDA ≈ $92 million). This is a modest compression from the 13.5× EV/EBITDA seen a quarter ago and still below the peer median of 14–16× for comparable Mediterranean‑oriented concepts. The EV/EBITDA discount is driven by a relatively low cap‑ex base and a stronger cash‑conversion cycle (DPO down 3 days, DSO flat).

Trading implications

• The earnings beat and margin lift have already priced in part of the upside, but the valuation gap—forward P/E ~18× vs. 22–25× for peers—leaves room for a 2–3% upside on a pull‑back to the $30–32 range (current price $33).
  
• The EV/EBITDA compression adds a bottom‑‑up cushion; a breakout above the 20‑day SMA (~$33.5) with volume could signal the start of a trend‑following rally.
  
• If the market begins to price in the “category‑defining” narrative more aggressively, the stock could re‑price toward the higher peer multiples, capping upside near $35–36.
  

Actionable stance: With a still‑reasonable valuation relative to peers and improving profitability, a light‑to‑moderate long position on any pull‑back to $30–32 is justified. Tighten stops just above $34 (the recent resistance) and watch for a break of the 20‑day SMA on volume for a potential upside thrust. If the price stalls above $35 without earnings momentum, consider trimming or shifting to a neutral stance.