Regarding coffee chains, most of the focus centers on Starbucks (SBUX -0.30%). This makes sense, as the industry leader has grown from a regional name to an international sensation in its 33 years as a publicly-traded company.
But with Starbucks now a mature business, the market may have its next big coffee stock with the emergence of Dutch Bros (BROS -0.66%). The company has grown popular for its Dutch Classics, drinks based on espresso and half and half. Other beverages such as teas, smoothies, and lemonades also help drive sales.
Additionally, the stock is set to soar amid the company's rapid expansion. With a 10- to 15-year goal of growing to 4,000 locations, Dutch Bros can accelerate its already impressive growth.
The growth of Dutch Bros
The push to 4,000 is happening quickly. As of the third quarter of 2024, Dutch Bros operated 950 locations in 18 states, up 20% from the year-ago period.
Not surprisingly, this expansion has profoundly affected its financials. Revenue in the first three quarters of 2024 increased 32% year over year to $938 million. That also included a same-shop sales increase of 5.2% over the same period.
Recent results have helped turn around a stock that had largely been depressed since its 2021 initial public offering (IPO). Thanks to the latest rally sparked by its Q3 2024 earnings report, Dutch Bros stock gained 65% in 2024.
Despite ongoing profitability improvements, the stock sports a triple-digit price-to-earnings (P/E) ratio. However, its price-to-sales (P/S) ratio is a more attractive 4.4 as of this writing, a modest premium to Starbucks, which trades at 2.9 times sales.
But remember Dutch Bros' 950-shop footprint is tiny compared to Starbucks' global footprint of over 40,000 locations. With management aiming to more than quadruple its store count going forward, Dutch Bros represents a much more compelling long-term growth story.
