FWRG Stock: Is First Watch a Good Restaurant Stock to Own?

Key Takeaways:

• Analysts value First Watch stock at about $24 per share today
• That’s a potential 19% upside from today’s price of $19.88/share.
• First Watch is projected to deliver impressive earnings growth of 47-52% annually in 2026-2027
• Due to a strong growth outlook, the restaurant stock trades at 57x forward earnings
• Get accurate financial data on over 100,000 global stocks for free on TIKR >>>

First Watch Restaurant Group (FWRG), through its subsidiaries, operates and franchises restaurants under the First Watch trade name in the United States. The company used to be called AI Fresh Super Holdco but it changed its name to First Watch Restaurant Group in December 2019.

Valued at a market cap of $1.2 billion, First Watch is a small-cap stock that is down 22% from its all-time highs. So, let’s see if FWRG stock is a good buy at its current price.

Is First Watch Stock a Good Buy Right Now?

First Watch Restaurant is a breakfast-focused chain that topped $1 billion in revenue for the first time in 2024 as it outlined plans to combat industry-wide traffic challenges with targeted marketing investments.

The daytime dining leader reported fourth-quarter revenue of $263.3 million, which was up 7.6% from last year’s Q4. Same-store sales dipped 0.3% as traffic fell 3%, but showed continued improvement from the third quarter.

CEO Chris Tomasso said 2024 was “pivotal” for First Watch, despite headwinds in the restaurant industry. First Watch maintained its premium positioning by avoiding the deep discounting seen across the industry while improving efficiency metrics.

“We controlled the controllables,” Tomasso said, highlighting improvements in labor efficiency, restaurant-level margins, ticket times, and employee turnover.

First Watch aggressively expanded its footprint last year, opening 50 new restaurants, including a record 25 in Q4. Average new restaurants are projected to generate third-year sales of $2.6 million, approximately 20% above system averages, with cash-on-cash returns exceeding 35%.

For 2025, First Watch projects low single-digit same-store sales growth with flat to slightly positive traffic. It plans to increase marketing investments significantly as part of a “create more demand” strategy after successful tests in 2024.

However, the chain faces commodity pressures, particularly from eggs affected by avian influenza, which is driving high single-digit inflation. Management implemented a modest 1.3% price increase in January, maintaining its disciplined approach of pricing based on long-term trends rather than transitory spikes.

First Watch expects to open 59-64 system-wide restaurants in 2025, while adjusted EBITDA is projected to be between $124 million and $130 million, up from over $100 million in 2024.

“Every year inevitably presents unique challenges,” Tomasso said. “We approach them all the same way with a long view.”

Let’s see if the restaurant stock is undervalued at the current price.

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What is the 2-Minute Valuation Model?

Three core factors drive a stock’s long-term value:

• Revenue Growth: How big the business becomes.
• Margins: How much the business earns in profit.
• Multiple: How much investors are willing to pay for a business’s earnings.

Expected Normalized EPS * Forward P/E ratio = Expected Share Price

Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.

Does First Watch Restaurant Stock Look Undervalued?

Forecast

Looking at FWRG’s earnings forecast chart, we can see an interesting pattern. After a slight earnings dip expected in 2025, First Watch is projected to deliver exceptional growth in 2026 and 2027, with earnings increasing by nearly 50% annually.

This J-curve pattern suggests that, while there may be short-term challenges, the company is well-positioned for substantial long-term growth.

This earnings recovery is likely to be driven by:

• Daytime-Only Focus: First Watch operates exclusively during daytime hours, which enables a better work-life balance for employees and potentially reduces turnover in an industry known for its labor challenges.
• Fresh Ingredients Positioning: The company emphasizes fresh, made-to-order food with seasonal menu innovations, allowing it to capture premium pricing and differentiate from traditional breakfast chains.
• Significant Whitespace Opportunity: First Watch believes it can grow from its current base of about 500 restaurants to more than 2,200 locations nationwide, providing a clear expansion runway.
• Strong Unit Economics: New restaurant openings have demonstrated attractive returns on investment, with strong average unit volumes (AUVs) and store-level margins supporting the expansion strategy.

See First Watch Restaurant’s full analyst estimates (It’s free) >>>

Valuation Multiple

First Watch’s historical valuation shows that the market has been willing to pay a premium for the company’s growth potential:

The stock has averaged a forward P/E of 56x since its initial public offering (IPO), with peaks exceeding 120x in its early trading days. Currently, First Watch trades at 57.1x forward earnings, which is right in line with its historical average.

This suggests that despite the premium multiple compared to the broader market, investors recognize First Watch’s growth potential and are willing to pay up for it.

For our valuation, we’ll use a forward P/E multiple of 32x, which is conservative relative to its historical average but acknowledges its strong growth profile.

Fair Value of FWRG Stock

Using our 2-Minute Valuation Model and applying a conservative approach:

• Conservative 2027 EPS estimate: $0.75
• Conservative forward P/E multiple: 32x

Expected Normalized EPS ($0.75) * Forward P/E ratio (32x) = Expected Share Price ($24)

This would give us a $24/share 2-year valuation for First Watch stock.

With FWRG stock currently trading at around $20/share, this implies a potential upside of approximately 20% over the next two years, or an annualized return of about 9.5%.

What is First Watch Restaurant’s Stock Price Target?

Analysts have an average price target of around $24/share for FWRG stock, indicating they see nearly 20% upside for the stock from its current levels.

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Risks to Consider

• The projected earnings decline in 2025 (-7.9%) could create selling pressure if it is worse than expected or if the recovery is delayed.
• At 57x forward earnings, First Watch trades at a significant premium to many restaurant peers, leaving little room for execution missteps.
• Dining out is a discretionary expense that could be reduced during economic downturns, potentially impacting same-store sales growth.
• The restaurant industry continues to face challenges related to food inflation and labor costs, which could pressure margins.

TIKR Takeaway

First Watch presents an interesting growth opportunity in the restaurant sector. While the stock is not deeply undervalued at current levels, its impressive projected earnings growth of 47-52% in 2026-2027 could justify the premium multiple the stock currently trades at and deliver solid returns for patient investors.

With analysts projecting 19% upside and our model suggesting similar returns over two years, First Watch could be a reasonable addition to a growth-oriented portfolio, particularly for investors who believe in the company’s long-term expansion story.

Is First Watch Restaurant stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if the stock is undervalued today.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!