Fast-Casual Frenzy: Which Stock Reigns Supreme?
The fast-casual restaurant industry has been on fire, with two young chains, Cava Group (NYSE: CAVA) and Dutch Bros (NYSE: BROS), leading the charge. Cava, a Mediterranean-inspired eatery, saw its stock soar an impressive 162% in 2024, outpacing Dutch Bros’ respectable 65% gain. But is Cava’s stellar performance justified?
A Tale of Two Chains
Both companies are rapidly expanding and resonating with their target markets. However, they operate under different themes. Dutch Bros focuses on custom beverages and limited food options, while Cava offers a full restaurant experience with higher-priced fare. This disparity is reflected in their sales per unit, with Cava generating more revenue per location.
Comparing Key Metrics
Let’s examine the companies’ sales growth, comparable sales (comps) growth, net income, and store growth over the past three quarters:
| Quarter | Dutch Bros | Cava Group |
| — | — | — |
| Q1 | 39% | 30% |
| Q2 | 30% | 35.2% |
| Q3 | 28% | 39% |
| Quarter | Dutch Bros | Cava Group |
| — | — | — |
| Q1 | 10% | 2.3% |
| Q2 | 4.1% | 14.4% |
| Q3 | 2.7% | 18.1% |
| Quarter | Dutch Bros | Cava Group |
| — | — | — |
| Q1 | $16.2M | $14M |
| Q2 | $22.2M | $19.7M |
| Q3 | $21M | $18M |
| Quarter | Dutch Bros | Cava Group |
| — | — | — |
| Q1 | 45 | 14 |
| Q2 | 36 | 18 |
| Q3 | 38 | 11 |
Cava’s stronger performance is evident, particularly in its comps growth, which suggests a concept that resonates with customers.
Long-Term Growth Opportunities
Both companies envision significant expansion, with Dutch Bros aiming for 4,000 stores over the next 10-15 years and Cava targeting at least 1,000 stores by 2032. While Dutch Bros needs to open more stores to achieve similar growth, Cava’s higher sales per unit can generate similar growth with fewer openings.
Valuation and Verdict
Neither stock is cheap, but both trade at a price-to-earnings growth (PEG) ratio below 1, indicating potential value. Dutch Bros is significantly cheaper than Cava, making it a more attractive option. Despite Cava’s impressive performance, its stock may be due for a correction after its massive rise last year. Dutch Bros, with its robust growth opportunities and lower valuation, is the better buy today.
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