Investors who can appreciate a good cup of joe should take a closer look at Dutch Bros(NYSE: BROS). Shares of the drive-through coffee shop operator and franchiser are piping hot, surging 160% over the past year. The company’s innovative drive-through beverage concept has proven highly popular, generating strong growth with accelerating profitability.
Even with the stock commanding a pricey valuation, there are plenty of reasons to believe it’s still in the early stages of a much bigger opportunity. The company’s ability to execute a national expansion could prove highly lucrative for its shareholders.
Could buying Dutch Bros stock today generate multibagger returns that set its investors up for life? Here’s what you need to know.
Dutch Bros has emerged as one of the fastest-growing food and beverage brands in the U.S., with 982 shops as of the end of 2024, more than double the 471 locations at the company’s 2021 initial public offering (IPO).
The rapid pace of shop openings was a major theme in 2024, and the company is targeting at least another 160 new locations in 2025. This expansion strategy seems like a no-brainer, given the highly profitable unit economics reflected in some spectacular financial trends.
In 2024, Dutch Bros’ revenue climbed by 33% year over year to $1.3 billion, while adjusted earnings per share (EPS) surged by 63% to $0.49 compared to $0.30 in 2023. Perhaps even more impressive was the 6.8% increase in company-operated same-shop sales growth, a pace that has accelerated in recent quarters, capturing both transaction volume and higher pricing. This indicator highlights the fervent brand momentum to support a further growth runway.
Dutch Bros is projected to deliver 23% revenue growth this year, alongside a solid 20% increase in earnings per share (EPS), according to Wall Street estimates tracked by Yahoo! Finance. This outlook aligns with the company’s guidance, which targets same-shop sales growth between 2% and 4%, incremental to the 16% boost expected from new store openings.
Investors can look forward to several developments representing multiyear transaction drivers. First, the company is ramping up mobile ordering availability through its app. The system not only keeps users engaged with a loyalty program, but adds operating efficiency by speeding up wait times. Dutch Bros is also testing an expanded food menu.
Ultimately, the success of these initiatives will be key to how Dutch Bros stock performs over the next decade.
Metric
2024
2025 Estimate
Revenue
$1.3 billion
$1.6 billion
Revenue growth (YOY)
32.6%
23.2%
EPS
$0.49
$0.59
EPS growth (YOY)
63.3%
20%
Data source: Yahoo! Finance. YOY = year over year.
Before indulging in one of Dutch Bros’ signature flavored iced lattes and loading up on the stock, it’s important to examine it with a critical eye and consider what could go wrong.
The company’s plan to open more than 4,000 shops over the next 10 to 15 years implies that Dutch Bros will need to accelerate its pace of new shop openings each year. Rapid development begins to introduce some logistical headwinds, particularly in terms of securing prime real estate locations that fit within the drive-through model and the challenge of operating those locations effectively at scale. By this measure, the main risk to consider is a scenario where growth begins to disappoint relative to these lofty expectations.
All of this is against a backdrop where Dutch Bros’ stock already commands a premium valuation, currently trading at 127 times the consensus EPS estimate for 2025, a forward price-to-earnings (P/E) ratio that prices in growth well into the future. While this metric alone doesn’t necessarily mean the shares are too expensive to own or might need to be sold off, it could at least serve to limit the near-term upside in the stock price.
Whether Dutch Bros ultimately delivers life-changing returns over the next decade will depend on its ability to continue capturing market share, and on the performance of rival Starbucks as a leader in the quick-service beverage category. While there’s a long road ahead Dutch Bros’ latest results are encouraging and keep that possibility on track. But don’t forget that banking on just one stock isn’t a smart way to make money. Investors should also aim for a diversified portfolio and never plan on just one stock making them rich.
However, investors confident in the Dutch Bros concept and its long-term potential can consider buying the stock now as a tasty addition to a diversified portfolio.
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Dan Victor 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.
Could Buying Dutch Bros Stock Today Set You Up for Life? was originally published by The Motley Fool
