Top Emerging Brands: Dutch Bros and On Holding Show Promise

Investing in newer brands can yield substantial profits. Recently, two companies from the restaurant and athletic wear sectors have caught Wall Street’s attention.

Dutch Bros (NYSE: BROS) and On Holding (NYSE: ONON) are both experiencing remarkable demand for their products, reflected in their stock performance, with each approximately doubling in value over the past year.

1. Dutch Bros: Enhancing Growth Through Innovation

Dutch Bros stands out with its specialty beverages and emphasis on customer service, driving impressive growth. Identifying promising restaurant brands early can lead to rewarding long-term investments, and Dutch Bros appears to be one such opportunity.

Revenue has steadily increased around 30% year-over-year in recent years due to a mix of modest same-store sales growth and new locations. In the latest quarter, the company reported a 29% year-over-year increase in revenue. Management projects 160 new shop openings for 2025.

One appealing aspect of Dutch Bros is its potential to enhance sales at existing locations. The introduction of new flavors, such as cereal-flavored lattes and brownie batter mochas, has contributed to its growth. Management credits these innovations for their strong financial performance.

The company recently opened its 1,000th shop in Orlando, Florida, aiming for a total of 2,029 shops by 2029. Its ability to expand into several thousand outlets over the next decade could provide significant returns for investors.

2. On Holding: A Rising Star in Athletic Apparel

Investing in Nike back in the 1980s would have been a lucrative move. Similarly, On Holding is an emerging footwear brand poised for impressive growth. It is increasing sales rapidly and has reportedly achieved greater profit margins than Nike.

On aims to grow sales at an annualized rate of 26% through 2026, and it is already ahead of schedule. Recent sales surged 43% year-over-year in the last quarter. Notably, On’s profit margin is now over 10%, while Nike’s has fallen into single digits on a trailing-12-month basis.

This rising profit margin suggests On is not using aggressive discounting strategies to increase sales; instead, consumers are willingly paying for its advanced cushioning technology, which allows for enhanced performance.

Furthermore, On’s Cloud shoes are gaining traction as everyday sneakers, expanding its reach to millions of customers across 80 countries. The company’s apparel sales grew 40% year-over-year last quarter, signaling increased brand awareness.

With annual sales nearing $3 billion, On is capturing market share in the athletic apparel space while still being small enough to deliver significant returns for patient investors. Management is concentrating on increasing brand awareness, enhancing online sales, and maintaining solid profitability—strong indicators of promising future returns.

Considerations for Investors

If you’re thinking about investing $1,000 in Dutch Bros, keep the following in mind:

While Dutch Bros shows promise, it did not make the list of the 10 best stocks identified by the Motley Fool analyst team. Previous selections from this list, like Netflix and Nvidia, have delivered immense returns for early investors.

Currently, the Motley Fool Stock Advisor has an impressive average return of 975%, significantly outperforming the S&P 500 at 172%. Exploring the latest recommendations may offer additional investment opportunities.

John Ballard has positions in Dutch Bros. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends Dutch Bros and On Holding. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.