Artal International just sold $1,073,040,000 worth of CAVA Group (NYSE:CAVA) stock on Nov. 18 as part of its broader investment strategy. With current price of $139.69 CAVA has shown one-year impressive price return of 316.91%. Artal's decision to capitalize CAVA on stock's appreciation is coherent.

About CAVA Group

CAVA Group Inc. operates the CAVA restaurant chain, a fast-casual Mediterranean style restaurants, that promotes healthy and flavorful Mediterranean-inspired dishes. They are known for their customizable options for their customers. In 2018 they acquired Zoes Kitchen but as of May 2023 all Zoes Kitchen locations have been closed, and some are converted into CAVA restaurants.

The CAVA Group currently operates on a small margin; therefore, this company has to generate sales of $729 million to reach a net profit of $13 million. Previously, with their sales reached the figure below $700s million, they had net losses.

Above is a picture depicting how CAVA Group makes money. Apparently, they operate high cost of sales that makes 75% of the revenue with total operating expenses reaches more than 20% of the sales they can earn leaving very small net income margin of 1.8% only.

Having too small margin is dangerous, leaving little room for error. Any unexpected expenses or events can lead to financial trouble. Low profitability also means less money available for expansion or doing research and development. CAVA Group needs to be more efficient in the way they operate the business.

Despite the stock sale, Artal International still holds a significant portion in their portfolio:

After the selling, CAVA still makes 92.07% of total Artal's portfolio. They actively involve themselves in CAVA Group's board of directors to contribute to the CAVA's decision-making process.

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