Analyzing Dutch Bros: Is This Coffeehouse Growth Story Still Worth Investing In?

Shares of Dutch Bros (NYSE: BROS) are experiencing significant gains following the company’s impressive fourth-quarter results and optimistic future guidance. The stock has surged nearly 200% over the past year and has risen over 50% year to date.

Let’s delve into Dutch Bros’ performance and evaluate whether it’s still a good time to invest in the stock.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Plans for Aggressive Expansion

Dutch Bros is primarily focused on expanding its footprint. In 2024, the company opened 151 new locations, with 128 of those being owned by the company. This includes 32 new stores and 25 company-owned locations in the fourth quarter alone. By the end of the year, the company had a total of 982 locations, 670 of which it owned.

Looking ahead, Dutch Bros aims to open at least 160 new locations in 2025, marking about 16% unit growth. Plans are also in place to accelerate this growth starting in the year’s second half.

The newer store designs are smaller, generally ranging from 800 to 1,000 square feet, featuring multiple drive-thru lanes and walk-up windows. When Dutch Bros went public in 2021, it reported cash-on-cash returns between 35% and 75% in its second year, depending on the leasing strategy. This return is compelling, and the company has leveraged its operating cash flow to support the openings.

As a result of its expansion, Dutch Bros achieved a 35% increase in fourth-quarter revenue, totaling $342.8 million. This figure surpassed analyst forecasts of $318.8 million.

Same-store sales increased by 6.9%, with total transactions rising 2.3%. Notably, company-operated stores saw comparable sales surge 9.5%, with transactions climbing 5.2%. This performance is significant as sales from company-owned stores are crucial for revenue compared to franchise-driven sales. The company attributed its success to innovative offerings and effective limited-time promotions.

Currently, 96% of locations offer mobile ordering, accounting for about 8% of total orders. The rewards program also performs well, with 71% of transactions occurring from rewards members.

On the profitability front, company-operated store gross margins rose by 280 basis points to 21.4%, despite rising coffee prices. Improved gross margins can lead to stronger profitability over time.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared by 41% year over year to $48.8 million, with adjusted earnings per share (EPS) rising 75% from $0.04 to $0.07, surpassing analyst expectations of $0.02 EPS.

For 2025, the company projects revenue between $1.555 billion and $1.575 billion, which reflects 22% growth at the midpoint. It anticipates same-store sales to range between 2% and 4%, and adjusted EBITDA between $265 million and $275 million.

Encouraging initial tests of food offerings suggest that there’s a demand for food along with coffee. Currently, food sales comprise only 2% of total revenue, compared to Starbucks, where food made up 19% of sales in the last quarter. Dutch Bros plans to expand its food tests without compromising baristas’ job satisfaction or operational efficiency.

Image source: Getty Images.

Is Dutch Bros Stock Still Worth the Investment?

The company is effectively boosting same-store sales, with food offerings serving as a potential growth area. However, the stock’s affordable pricing has changed; it previously traded below three times its forward price-to-sales (P/S) ratio, often comparable to Starbucks. Now, following its price increase, it trades approximately seven times its 2025 estimates, over double Starbucks’ valuation.

Dutch Bros has several innovative growth strategies in place, particularly through expansion and enhancing food options. Nevertheless, at current stock prices, it may no longer be the bargain it once was. Therefore, it would be prudent to avoid chasing this stock at its current levels.

A Second Chance at a Promising Investment

Have you ever thought you missed out on investing in successful stocks? If so, you may be interested in what follows.

Occasionally, our expert analysts issue a “Double Down” stock recommendation for companies they predict will see substantial gains. If you’re anxious that you’ve missed your opportunity, now might be an ideal time to invest before potential growth is realized. The results speak for themselves:

• Nvidia: An investment of $1,000 when we doubled down in 2009 would be worth $360,040!*
• Apple: An investment of $1,000 when we doubled down in 2008 would now be worth $46,374!*
• Netflix: An investment of $1,000 when we doubled down in 2004 would now be worth $570,894!*

Currently, we are offering “Double Down” alerts for three outstanding companies, and this opportunity may not come again soon.

Learn more »

*Stock Advisor returns as of February 3, 2025

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.

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