Dutch Bros was a risky initial public offering (IPO) stock a few years ago, but it has emerged as a well-run company with tons of opportunity that's generating increasing profitability along with robust sales growth. If you're looking for a high-growth stock, it's a great candidate. Here are three reasons why.

1. Huge expansion plans

Dutch Bros isn't significantly different than any other coffee chain. They all serve similar beverages and some food items. But it's distinguishing itself through its differentiated culture and focus on speed and service -- the opposite of which is causing competitor Starbucks some headaches these days.

So far, customers love Dutch Bros, and it's been able to replicate its model in regions across the country. It was predominantly a West Coast operation when it went public, but it has developed a significant presence coast to coast in 17 states.

That's likely because even though it's only been a public company since 2021, and it only has 876 stores, it's been around for 30 years. The company developed a distinct and customer-friendly culture over decades, and management has sensed that there's a large opportunity in bringing the concept to customers all over the country.

The founder-CEO stepped down last year to make room for an experienced food executive to build a new team and take the concept further. It's already investing in a growth infrastructure, opening a new resource center to meet growing demand. Management sees the opportunity to reach 4,000 stores over the next 10 to 15 years, and so far, store openings are right on or surpassing the schedule. It opened 159 stores in 2023 and is planning to open up to 165 this year. This is moderate annual expansion that ensures steady, efficient growth and a long runway.

2. High growth

Part of what's creating investor confidence is Dutch Bros' high sales growth. Revenue increased 39% year over year in the 2024 first quarter to $275 million.

For several quarters, investors were concerned about the company's low -- and at times, even declining -- comparable sales growth. Comparable sales growth measures how sales are increasing from stores that have already been in operation, usually for a year or longer. Comparable sales growth is important because it illustrates how well a company can create loyalty and generate demand from repeat customers. That's what makes a concept viable over the long term. It also leads to increased profitability, since fixed costs are spread out over more sales and work more efficiently.

Comparable sales growth is back in acceleration mode, and they were up 10% year over year in the first quarter. That includes the company's "fortressing" strategy, which involves opening up several new stores in a given area at once to establish a brand presence. This could create pressure in comps growth in the short term, but lead to growing overall sales in the long term.

Sometimes the larger perpetual winners are the best bets on the stock market. But to achieve the highest gains on your investments, you often need to look for smaller companies that are demonstrating high sales growth. Dutch Bros fits the bill.

3. Improving profitability

Many young and growing companies don't make any profits. That's the normal cycle of a company. It's often a risk versus reward proposition; the younger and higher-growth the company, the more risk attached, and the higher the potential for gains. Having no profits comes with risk, because if a company doesn't eventually become profitable, it won't last.

Dutch Bros has been inconsistent with its net income, but it reported a profit for the full year in 2023 according to generally accepted accounting principles (GAAP). It also continues to show higher adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) year over year each quarter. Net income increased from a $9 million loss last year to positive $16 million in the first quarter, and adjusted EBITDA more than doubled to $53 million. As it scales, it's using its resources more efficiently, and profits should continue to grow.

Dutch Bros stock is up 25% this year, and investors can catch it now as it keeps climbing.