Dutch Bros Shares Surge on Strong Performance: Is It Time to Invest?

Shares of Dutch Bros (BROS) have seen impressive growth following the company's strong fourth-quarter performance and optimistic future outlook. The stock has surged nearly 200% over the past year and over 50% year to date.

In this article, we'll explore the factors behind Dutch Bros' success and discuss whether it's still a good time to buy the stock.

Positive Expansion Plans

At its core, Dutch Bros is focused on expansion. The company opened 151 new stores in 2024, with 128 being company-owned. During the fourth quarter alone, they added 32 new stores, bringing the total to 982 locations, 670 of which are company-owned.

Looking ahead, Dutch Bros plans to open at least 160 new stores in 2025, representing approximately 16% growth in locations. The company aims to accelerate this growth in the latter half of the year.

Notably, Dutch Bros has introduced smaller store concepts that range between 800 to 1,000 square feet, featuring multiple drive-thru lanes and a walk-up window. After its IPO in 2021, the company showcased impressive cash-on-cash returns of 35% to 75% based on different leasing arrangements, which helps fund new openings through operational cash flow.

The expansion efforts contributed to a 35% increase in fourth-quarter revenue, amounting to $342.8 million, which exceeded analyst expectations of $318.8 million.

In addition to revenue growth, same-store sales increased by 6.9%, with transactions climbing by 2.3%. More significantly, sales at company-operated stores saw a remarkable 9.5% increase, due in part to innovative product offerings and limited-time promotions.

Currently, 96% of Dutch Bros locations offer mobile ordering, with mobile orders accounting for 8% of total transactions. The company's rewards program is also performing well, with 71% of all orders coming from rewards members.

Despite rising coffee prices, company-operated store gross margins improved by 280 basis points to 21.4%, which bodes well for future profitability.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 41% year over year to $48.8 million, while adjusted earnings per share (EPS) increased by 75%, from $0.04 to $0.07, easily surpassing the anticipated $0.02 per share.

For 2025, Dutch Bros forecasts revenue between $1.555 billion and $1.575 billion, implying a growth rate of 22% at the midpoint. Expectations for same-store sales are set between 2% and 4%, with adjusted EBITDA projected between $265 million and $275 million.

Additionally, initial tests of expanding food offerings are promising. Recognizing that many customers prefer food with their beverages, Dutch Bros aims to enhance its food menu while ensuring it does not compromise barista satisfaction or service speed.

Buying Considerations

Dutch Bros has made significant strides in increasing same-store sales, and expanding its food offerings presents a substantial opportunity. Currently, food sales represent only 2% of total revenue, compared to Starbucks, where food accounted for 19% of sales last quarter.

With fewer than 1,000 stores, Dutch Bros has considerable room for growth. In contrast, Starbucks boasted 11,242 company-owned locations and a total of 18,537 stores in North America at the end of last year.

In the past, Dutch Bros traded at a forward price-to-sales (P/S) ratio of 3 or lower, remaining competitive with Starbucks. However, with its recent stock price surge, it now trades around 7 times its 2025 estimates, significantly higher than Starbucks.

Despite Dutch Bros' solid growth prospects through expansion and food offerings, the stock no longer appears to be a bargain. As such, it may not be prudent to chase the stock at the current price levels.

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 and has a disclosure policy.

shares, expansion, revenue, food, investment