Cava Group Inc., (NYSE: CAVA), despite a steep decline in the stock price due to major shareholder selling still offers a great investment opportunity.
Stocks fell nearly 8% after Tricia Tolivar, CFO and CEO Brett Schulman announced their plans to dispose of substantial amounts.
Tolivar and Schulman both plan to sell shares. Artal International, a major shareholder in the company, is also planning to offload 6 million shares.
These insider sales may be a good opportunity to buy rather than an alarm.
Cava’s potential growth mirrors Chipotle’s success
Cava’s value has almost tripled this year. It continues to have a strong growth potential.
Chipotle Mexican Grill, located in Washington, D.C., has been successful in recent years.
Chipotle, despite its global expansion of over 3500 locations, reported an impressive growth of 11% in sales comparables last quarter. This indicates a robust market.
Cava, on the other hand, operates 341 locations and has plans to add 50 more each year. The rapid growth of Cava could lead to future gains in stock, similar to Chipotle.
Cava is a profitable product that adds to the appeal
Cava’s aggressive growth strategy is reflected in its high Price-to-Earnings Ratio.
Cava, unlike other small companies that are growing, is profitable.
In Q1, the company’s earnings per share were 12 cents, and in Q2, they increased to 17 cents. This exceeded Wall Street expectations of 13 cents.
Cava has demonstrated its ability to achieve a balance between growth and profitability.
What should you do?
Wall Street has a “overweight rating” on Cava, despite its impressive gains to date.
Value and income investors, however, should take caution.
The stock does not currently pay dividends and is not considered to be undervalued.
The post, Why Cava is still a good buy even though major shareholders have sold substantial stakes in the company may change as new developments unfold.
