Is First Watch Restaurant Group, Inc. overvalued or undervalued?

As of 21 May 2025, the valuation grade for First Watch Restaurant Group, Inc. has moved from fair to very expensive. The company is currently overvalued, with a P/E ratio of 54, significantly higher than its peer Cracker Barrel Old Country Store, Inc., which has a P/E of 21.87. Additionally, First Watch's EV to EBITDA stands at 11.90, while Cracker Barrel's is 9.28, further indicating a premium valuation relative to its peers.
In comparison to the broader market, First Watch has experienced a year-to-date decline of 16.28%, contrasting sharply with the S&P 500's gain of 2.44% during the same period. With a ROCE of 4.13% and ROE of 2.83%, the company's returns do not justify its high valuation metrics, reinforcing the conclusion that it is overvalued in the current market environment.