Sweetgreen has gotten torched over the last six months - since January 2025, its stock price has dropped 60.5% to $13.29 per share. This might have investors contemplating their next move.

Is there a buying opportunity in Sweetgreen, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Sweetgreen Not Exciting?

Despite the more favorable entry price, we're cautious about Sweetgreen. Here are three reasons why you should be careful with SG and a stock we'd rather own.

1. Operating Losses Sound the Alarms

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

The restaurant business is tough to succeed in because of its unpredictability, whether it be employees not showing up for work, sudden changes in consumer preferences, or the cost of ingredients skyrocketing thanks to supply shortages.Sweetgreen has been a victim of these challenges over the last two years, and its high expenses have contributed to an average operating margin of negative 16.2%.

2. Cash Burn Ignites Concerns

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Over the last two years, Sweetgreen’s capital-intensive business model and large investments in new physical locations have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 7.7%, meaning it lit $7.69 of cash on fire for every $100 in revenue.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Sweetgreen burned through $60.94 million of cash over the last year, and its $329.4 million of debt exceeds the $183.9 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Sweetgreen’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Sweetgreen until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Sweetgreen isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 38.2× forward EV-to-EBITDA (or $13.29 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.

Stocks We Would Buy Instead of Sweetgreen

When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

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