Sweetgreen (SG) July 2024 Valuation Model and Risk Framework (Overvalued)

The Sweetgreen valuation model includes a multiples valuation, detailed operating model, historical financials, projections, unit economics, and segment build. Assumptions can easily be adjusted by the user.

The business trades very expensive to peers at above 164x forward EBITDA (2024e), which doesn't make much sense, given its expected slowing revenue and earnings growth in 2024/2025. The company could potentially fit into a short basket of overvalued restaurant stocks as the consumer environment weakens. We feel similar about Cava Group (CAVA).

SG may not achieve EPS profitability until after 2029...even using Wall Street estimates. It has NEGATIVE net margins (worse than CAVA), and could have trouble scaling in the future. More than 75% of the company's growth is coming from new store openings and not existing store growth. Same-store sales growth going forward is expected to be less than 5.0%...

The company simply has too many ingredients and combinations to ever be even as close to as profitable as Chipotle (CMG). Analysts comparing SG and CAVA to Chipotle are completely disillusioned. "In urban Boston, MA, a steakhouse chopped salad at $SG costs $16.55, as compared to a steak burrito bowl down the street at $CMG Chipotle for $11.10 (no guacamole, similar calories if not a bit less - source: web apps). In suburban Troy, MI, one would pay $1.10 less at SG, and 75c less at CMG for the same items."

There are similarly lower priced salad and bowl competitors in many markets...

Already, customers are cutting back on MCD, SBUX, and WEN as they struggle with higher prices. Even higher income customers are going to pick up their own $17+ Sweetgreen salads, rather than using UBER Eats, Grubhub, and DoorDash, which is a sign of the times.

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