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Despite a sharp decline in stock prices due to selling by major shareholders, Cava Group Inc. (NYSE: CAVA) still presents a compelling investment opportunity.
The stock dropped nearly 8% today after CEO Brett Schulman and CFO Tricia Tolivar announced plans to sell substantial shares.
Schulman will offload 201,504 shares, while Tolivar will sell 5,000 shares. Additionally, major shareholder Artal International is set to sell 6 million shares.
However, these insider sales might offer a buying opportunity rather than a red flag.
Cava’s growth potential mirrors Chipotle’s success
Cava, which has nearly tripled in value this year, continues to show strong growth potential.
The company, based in Washington, D.C., operates on a production line system similar to Chipotle Mexican Grill’s, which has proven successful for Chipotle in recent years.
Despite its expansion to over 3,500 global locations, Chipotle reported an impressive 11% growth in comparable sales last quarter, signaling robust demand.
In contrast, Cava operates 341 restaurants and plans to open 50 new locations annually. This rapid expansion could drive future stock gains, following in Chipotle’s footsteps.
Cava’s profitability adds to its appeal
Cava’s aggressive expansion strategy has resulted in a high price-to-earnings ratio, reflecting its growth-focused approach.
Yet, unlike many small growth companies, Cava is profitable.
The company reported earnings of 12 cents per share in Q1, increasing to 17 cents per share in Q2, surpassing Wall Street estimates of 13 cents.
This performance underscores Cava’s ability to balance growth with profitability.
Should you invest?
Wall Street currently holds a consensus “overweight” rating on Cava stock, even after its significant year-to-date gains.
While growth investors may find Cava appealing, value and income investors should be cautious.
The stock is not undervalued and does not pay dividends at this time.
The post Why Cava remains a buy despite major shareholders selling substantial stakes appeared first on Invezz
