CAVA GROUP, INC. (CAVA) stock intrinsic value fair value estimate & owner earnings analysis

CAVA operates a fast-casual Mediterranean restaurant chain (bowls and pitas) that had 439 restaurants in 28 states and Washington, D.C. at the end of fiscal 2025, and also sells its dips and spreads in grocery stores. It opened 72 net new restaurants in 2025, 58 in 2024 and 72 in 2023. Revenue rose to $1,179.7 million in 2025 from $963.7 million in 2024. Same-restaurant sales grew 4.0% in 2025 (2.4% from price and mix, 1.6% from guest traffic), down from 13.4% in 2024, and restaurant-level profit margin slipped to 24.4% from 25.0%. Net income fell to $63.7 million from $130.3 million, partly because 2024 included a $71.6 million deferred tax benefit. How we measure earnings. We start from operating cash flow ($184.8 million in 2025), remove the cash swing from working capital (a $21.5 million inflow, mostly lease-related items, so it is taken out), deduct stock compensation ($15.2 million) as a real cost, and deduct only the maintenance part of capital spending. The filings do not split capital spending between new restaurants and upkeep, so we estimated growth spending from the company's own ratio of spending to revenue growth. That leaves $127.2 million of the $158.7 million spent in 2025 treated as maintenance. This is a demanding estimate: it is well above depreciation of $73.7 million, and gross property and equipment rose $142.9 million in a year with 72 openings, which suggests most spending goes to building new restaurants. Owner earnings per share on this basis were -$0.78 in 2023 (the IPO year, with a partial-year share count), $0.42 in 2024 and $0.18 in 2025. We anchor on the two years since the IPO year, which gives about $0.30 per share, or roughly $96,000 per restaurant-year across an average of about 370 restaurants. Owner earnings fell about 58% in 2025 because capital spending rose $50.6 million; we do not treat that as a permanent decline. Why the first year of each case sits above the latest actual. The 439 restaurants open at year-end 2025 compare with an average of about 403 during 2025, and the quarterly report for the 28 weeks ended July 12, 2026 shows revenue up 31.7% to $806.7 million, operating cash flow up to $134.5 million from $98.9 million, and capital spending of $89.7 million versus $77.0 million. Restaurants already open are secured earning power, so 2026 starts from the anchor per restaurant applied to the larger, already-built base. What we credit and what we leave out. We credit new restaurants at a pace at or below the 58 to 72 net openings a year achieved in each of the last three years, funded from the company's own operating cash flow and IPO proceeds, and stop crediting once a fixed count is reached rather than assuming openings run indefinitely. We do not credit same-restaurant sales growth (mostly menu price, which offsets cost inflation), margin expansion, new products, or management's stated opportunity for more than 1,000 restaurants by 2032, none of which is yet demonstrated. Once openings stop, existing restaurants keep earning after maintenance spending, and we hold that level flat with no further growth. Bear case, about $3.30 per share. Restaurant-level margin keeps sliding 0.6 points a year for three years, as it did in 2025 amid higher input costs (grilled steak), delivery mix and insurance costs, taking earnings per restaurant from about $96,000 to about $43,000. Openings slow to 50 in 2026 and 30 in 2027, then stop at about 519 restaurants, and earnings stay at that lower level. Base case, about $10.10 per share. Earnings per restaurant stay at the $96,000 anchor. The company adds 60 restaurants a year through 2031 to reach about 799, then holds that level. Bull case, about $12.50 per share. Margins hold and openings continue at the demonstrated 72 a year for seven years, reaching about 943 restaurants. New restaurants earn about $16,000 more each because 2025 openings are trending above $3.0 million in average sales, versus the system average of $2.934 million. All cases use a 6% discount rate. The company has no borrowings outstanding that we found, and its $282.9 million of cash is not added on top because the interest it earns is already inside operating cash flow. All restaurants are leased, so lease commitments are the main fixed obligation in a downturn, which is reflected in the bear case. What could make this wrong. Because these figures depend heavily on how much capital spending is maintenance, the value would be materially higher if upkeep is closer to depreciation than to our estimate. The value would be lower if new restaurants earn less than existing ones, or if the restaurant margin decline accelerates. Earnings per restaurant on this measure are thin, so a change of a few margin points moves value a lot. The margin-of-safety price, about $5.00 per share, leaves a wide cushion to the bear case.