First Watch Restaurant Group, Inc. (FWRG): Among Stocks with Insanely High PE Ratios Insiders Are Selling

Yahoo

08-05-2025

We recently published a list of . In this article, we are going to take a look at where First Watch Restaurant Group, Inc. (NASDAQ:FWRG) stands against other stocks with insanely high PE ratios insiders are selling.
The U.S. stock market has turned into a theater of extremes right now. Growth stocks are seeing an abnormal price hike, but in some cases, it is almost proportionately met with the insiders cashing out. The flood of insider sales in companies trading at unbelievable price-to-earnings (PE) ratios has become the prime example of what would happen when euphoria crashes with caution.
But why are corporate executives – the insiders who know the company best- selling shares when investors are piling in on them? Let's connect the dots.
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Growth stocks continue to be at the center of attraction in 2025. They have been outperforming their value counterpart over the past decade, fueled by declining interest rates and increasing bets on innovation. Even when the Fed hiked the rates in 2023, growth stocks strived under pressure, with some sectors continuing to command premium valuations.
Many of these companies are now trading at PE ratios that even optimistic analysts could not justify. For that reason, insiders are selling, and they are doing it aggressively.
Retail investors chase fast-paced moments while corporate executives and major stakeholders pull their investments from the company. Data from the SEC's Form 4 filings reveal that insider sales for high-PE firms have increased recently, reflecting a widening gap between Wall Street's optimism and Main Street's reality.
It is yet to be decided whether these sales are a vote of no confidence in the insanely high valuations or simply prudent profit-taking. To answer this, we need to look at the broader economic environment. Recently, President Trump proposed a $163 billion budget cut, which involves slashing domestic programs while concentrating on defense and border security. The reduced funding for housing, education, and healthcare could hurt consumer spending, and hence, the cut has introduced fresh uncertainty into a market where investors are already scrambling due to interest rate and tariff rate uncertainties.
On the other hand, the Treasury bond market is also flashing warning signs. According to a report by Reuters, two-year yields have declined to 3.57%, nearly a full percentage point below the Fed's benchmark rate. Treasury Secretary Scott Bessent calls the gap a clear signal for rate cuts. When we look back at history, we will see that these dislocations usually preceded economic slowdowns, and in such an environment, the high PE stocks that could not meet the inflated expectations with their earnings will fall.
That said, high PE ratios are not always bad. They often reflect the market's confidence in the company's future growth. But when insiders start to dump the stocks amid geopolitical disturbances and rate cut debates, we cannot help but wonder whether this is calm before a storm. And it is here we must exercise caution. From our picks, you could see a red flag or a buying opportunity. However, one thing is clear. In today's market, ignoring the warning signs could be the riskiest move.
We have followed a few criteria when putting together our list of 10 stocks with unbelievably high PE ratios, being sold by insiders. All the stocks in the list have a PE ratio of 35 or more, which defines the term insanely-high for our article. We have further reduced the number of stocks to 10 by considering only those with an insider selling of 5% change or more in the last 6 months. This is to ensure that the potential investors are aware of the change in institutional mindset for stocks with an upward-trending PE ratio. Based on this insider selling, our picks have been ranked from 10 to 1. All the data in the article was taken from financial databases and analyst reports, with all information updated as of May 05, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points ().
A busy restaurant kitchen with a chef carefully plating a meal.
Headquartered in Florida, First Watch Restaurant Group, Inc. (NASDAQ:FWRG) is a daytime dining chain that offers breakfast, brunch, and lunch across the U.S. Competing with tough players like Denny's, the company gains a competitive advantage through fresh, made-to-order menu offerings and a no-franchise model for quality control. First Watch Restaurant Group, Inc. (NASDAQ:FWRG)'s primary target is suburban markets with significant foot traffic and many families. Labor availability, food cost inflation, and consumer preferences towards casual dining influence the company's performance. It is among the stocks insiders are selling.
First Watch Restaurant Group, Inc. (NASDAQ:FWRG) has recently announced its Q1 2025 results, which reported a 16.51% year-over-year growth. It also established 13 new system-wide restaurants across 10 states. On the other hand, the net income during the period has decreased to -$0.8 million from $7.2 million in the same period the previous year, owing to a significant decline in both income from operations margin and restaurant-level operating profit margin, and high food and labor costs. The new Adjusted EBITDA guidance range has declined from $124.0 million to $130.0 million in 2024 to $114.0 million to $119.0 million in 2025, indicating company growth complications.
Investor expectations for First Watch Restaurant Group, Inc. (NASDAQ:FWRG) seem to stand above average, as represented by the notable P/E ratio of 61.36. However, with a dramatic 52.97% rise in insider selling, it may be possible that the confidence from within the company's leadership is fading.
Overall, FWRG ranks 2nd on our list of stocks with insanely high PE ratios insiders are selling. While we acknowledge the potential of FWRG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than FWRG but that trades at less than 5 times its earnings, check out our report about this .
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Disclosure: None. This article is originally published at Insider Monkey.