First Watch Restaurant Group, Inc. (FWRG) stock intrinsic value fair value estimate & owner earnings analysis

First Watch is a daytime-only restaurant chain (breakfast, brunch and lunch, open about 7.5 hours a day) with 633 restaurants at the end of 2025: 560 company-owned and 73 franchised, across 32 states. Average sales per restaurant were $2.3 million in 2025 and revenue was $1.22 billion, up from $1.02 billion in 2024. It opened 64 restaurants in 2025 (55 company-owned) and plans about $150 million to $160 million of capital spending in 2026, mostly for new restaurants and remodels. How we measured earnings. We start with cash from operations ($125.9 million in 2025), remove swings in working capital, and subtract stock compensation ($10.8 million), because it is a real cost to shareholders. We then subtract only the capital spending needed to stand still. Growth spending is estimated as the historical ratio of capex to revenue (9.8% over 2021 to 2025) applied to the year's revenue increase, and the rest is treated as maintenance. First Watch spends heavily on new restaurants, so this method leaves it with little or negative owner earnings per share: $0.60 in 2021, $0.11 in 2022, $0.28 in 2023, -$0.15 in 2024 and -$0.42 in 2025. The 2021 year is excluded from our reference level because it was a post-shutdown recovery year with a large working-capital inflow and a partial-year share count from the October 2021 IPO. The median of 2022 to 2025 is roughly zero. The company does not disclose how much of its capital spending is maintenance, so we could not refine this further, and the true maintenance cost is likely lower than our formula assumes. We did not adjust for that, since it cannot be shown from the filings. Growth. Owner earnings fell from -$0.15 in 2024 to -$0.42 in 2025, so we do not assume a near-term improvement. Income from operations fell to $27.5 million from $38.9 million in 2025 as commodity inflation ran at 5.0% (eggs, coffee, avocado, bacon), and the company guides 2026 same-restaurant sales growth of only 1% to 3%. We credit no growth from new markets or margin recovery. Bear case ($0 per share). Commodity costs and thin margins keep owner earnings around the 2025 level, the company keeps borrowing under its revolving credit facility (it drew a further $23.5 million in 2025) to fund openings, and no positive earnings power is established. The shares are worth little on this path. Base case ($2.80 per share). Owner earnings stay near zero for two years, rise to about $0.10 per share in years 3 and 4, and settle at about $0.20 per share from year 5 onward, a level between what the business earned in 2022 and 2023 under this method. We treat returning to a level already reached as not requiring new growth. We give no credit for restaurants not yet built. Bull case ($6.49 per share). Owner earnings recover to the 2023 level of $0.28 per share by year 2 and then grow about 5% a year for ten years, well below the roughly 11% unit growth of 2025 (55 company-owned openings on a base of about 505), before holding flat. What could make this wrong. If most of the roughly $157 million of annual capital spending is really for new restaurants, true owner earnings are considerably higher than shown, and all three cases are too low. If commodity inflation persists and traffic weakens, the base case is too high.