Sweetgreen has gotten torched over the last six months - since August 2025, its stock price has dropped 37.2% to $5.93 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Sweetgreen, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Sweetgreen Will Underperform?
Even with the cheaper entry price, we're swiping left on Sweetgreen for now. Here are three reasons we avoid SG and a stock we'd rather own.
1. Same-Store Sales Falling Behind Peers
Same-store sales is a key performance indicator used to measure organic growth at restaurants open for at least a year.
Sweetgreen’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.2% per year.
2. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Sweetgreen’s margin dropped by 10.8 percentage points over the last year. This decrease came from the higher costs associated with opening more restaurants.
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 $100.8 million of cash over the last year, and its $356.4 million of debt exceeds the $130 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
We see the value of companies helping consumers, but in the case of Sweetgreen, we’re out. Following the recent decline, the stock trades at $5.93 per share (or a forward price-to-sales ratio of 0.8×). The market typically values companies like Sweetgreen based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d recommend looking at the Amazon and PayPal of Latin America.
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