One of the hottest food stocks this year has been Cava Group (NYSE: CAVA). The Mediterranean restaurant chain went public last year, and while it didn’t get off to a great start, 2024 was a much better year for the stock. Since the start of the year, Cava’s valuation has increased by over 220% and is currently trading around its 52-week high.

What’s behind the stock’s impressive rally, and is Cava still a good buy today?

Cava is an unstoppable growth machine

One of the main reasons why Cava is able to attract a lot of growth investors is due to the impressive growth figures it generates. Not only is the company growing organically, but it is also aggressively launching more sites to expand its reach and enter new markets. And even though its growth rate has slowed from the monstrous levels of a year ago, the company’s sales are still growing at more than 35%.

CAVA operating revenue (quarterly growth year-on-year) data by Y charts.

What’s more impressive, however, is that the company isn’t just benefiting from launching new stores: it’s also generating strong organic numbers. For the period ending July 14, Cava reported its foodservice store sales growth of 14.4%. This figure simply takes into account the same restaurants opened a year ago. Many restaurants generate comparable sales growth in the single digits, and Cava’s ability to grow in the double digits is an encouraging sign that its restaurants are proving popular.

The company is also expanding its presence. At the end of the quarter, its restaurant count stood at 341, an increase of 22% from last year.

Is Cava stock too expensive?

There’s no doubt that Cava is a great growth stock today, but the big question is whether the premium investors are paying for it is simply too high. One way to compare this is against revenue and profit. This is how he resists Chipotle Mexican Grilla summit restaurant stock investors often compare it.

CAVA Ratio PE data by Y charts. PE = price/profit. PS = sale price.

Relative to revenue and earnings, investors are paying a much higher multiple for Cava Group. The counterpoint would be that Cava is at a much earlier stage of growth than Chipotle and therefore a higher multiple might be justifiable. But given the strong valuation of Cava in recent months, I would say that the gap is perhaps too wide at present on these two indicators.

Should you buy Cava group shares?

I am optimistic that Cava can continue to appreciate in value over the long term by investing in more growth opportunities. But its strong valuation suggests that much of the future growth is already priced into the stock price today. The danger for investors is that buying at such a high price could limit your potential to earn a significant return from the stock in the future.

Although the stock may rise in the near future – especially if its next quarterly results are once again strong – investors may want to temper their expectations, as it is not a cheap investment to own. I don’t know how high the stock could rise, but Cava could peak sooner rather than later. Given its high price, investors might be better off pursuing other growth stocks instead.

Should you invest $1,000 in Cava Group right now?

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool posts and recommends Chipotle Mexican Grill. The Motley Fool recommends Cava Group and recommends the following options: Short December 2024, $54 at Chipotle Mexican Grill. The Motley Fool has a disclosure policy.