Since July 2025, First Watch has been in a holding pattern, floating around $16.50. The stock also fell short of the S&P 500’s 11.5% gain during that period.

Is there a buying opportunity in First Watch, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is First Watch Not Exciting?

We don't have much confidence in First Watch. Here are three reasons there are better opportunities than FWRG and a stock we'd rather own.

1. Same-Store Sales Falling Behind Peers

Same-store sales show the change in sales at restaurants open for at least a year. This is a key performance indicator because it measures organic growth.

First Watch’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 1.8% per year.

2. Cash Burn Ignites Concerns

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.

While First Watch posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, First Watch’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 1.6%, meaning it lit $1.59 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.

First Watch burned through $30.41 million of cash over the last year, and its $982.9 million of debt exceeds the $20.71 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the First Watch’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 First Watch until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

First Watch isn’t a terrible business, but it isn’t one of our picks. With its shares trailing the market in recent months, the stock trades at 54.7× forward P/E (or $16.50 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. We’d suggest looking at the most entrenched endpoint security platform on the market.

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