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All information provided herein by Cedar Grove Capital Management, LLC (“CGCM”) is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. CGCM may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. CGCM may buy, sell, or otherwise change the form or substance of any of its investments. CGCM disclaims any obligation to notify the market of any such changes.
Looking at companies that have suffered from margin compression can be best represented by the restaurant industry. With rising costs, such as labor, food, rent, utilities, etc, restaurants have found it difficult to increase their bottom line and draw in more customers to their concept.
From the end of 2024 to today (the most recent quarter), the average decline in enterprise value per unit stands at -31%. Still, to this day, amongst the concepts shown below, three restaurant companies still trade at an enterprise value per unit’s restaurant-level EBITDA in the double digits.
One concept, CAVA, still seems to defy gravity, commanding a near $21 million EV against a most recent AUV of just $3.0 million with ~25% restaurant-level EBITDA margins. One of just a few concepts that is still managing to increase its AUV.
With these depressed valuations, could we potentially be seeing private equity scoop up some concepts and run them better? Guess we’ll see.
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Until next time,
Paul Cerro | Cedar Grove Capital Management
Personal Twitter: @paulcerro
Fund Twitter: @cedargrovecm
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Disclaimer: All information provided herein by Cedar Grove Capital Management, LLC (“CGCM”) is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. An offer or solicitation of an investment in a private fund will only be made to accredited investors pursuant to a private placement memorandum and associated documents.
CGCM may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. CGCM may buy, sell, or otherwise change the form or substance of any of its investments. CGCM disclaims any obligation to notify the market of any such changes.
The enclosed material is confidential and not to be reproduced or redistributed in whole or in part without the prior written consent of CGCM. The information in this material is only current as of the date indicated and may be superseded by subsequent market events or other reasons. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Any statements of opinion constitute only current opinions of CGCM, which are subject to change and which CGCM does not undertake to update. Due to, among other things, the volatile nature of the markets, an investment in our separately managed account structure will only be suitable for certain investors. Parties should independently investigate any investment strategy or manager, and should consult with qualified investment, legal, and tax professionals before making any investment.