Dutch Bros Still Trades at a Premium to Starbucks and Its Peers. Is the Growth Story Already Priced In?

Most people, including novice investors, have heard the expression, "Buy low, sell high." It's a simple concept, but very difficult to accomplish. That shouldn't necessarily dissuade you from looking at growth stocks. They typically have high valuations since investors have high expectations. As long as the company meets or exceeds them, the stock will perform well.

Turning to Dutch Bros (NYSE: BROS), the shares look expensive compared to the overall market and peer Starbucks (NASDAQ: SBUX). Do the company's growth prospects justify this valuation?

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Relative valuation

The price-to-earnings (P/E) ratio is a metric for comparing stock valuations. Dutch Bros has a trailing P/E ratio of 90. While that's down from the 150 multiple of a year ago, it's hardly a cheap valuation.

Starbucks' stock sells at a P/E ratio of 82, up from under 50. The stock price has gained 16.8% as the company has made some progress in its efforts to boost sales and profitability. Fiscal second-quarter same-store sales (comps) grew 6.2%, with 3.8 percentage points coming from higher traffic. The results were for the period that ended on March 29. This followed a first-quarter comps increase of 4%, with 3 percentage points coming from higher traffic and the balance from increased spending.

Both stocks trade at a much richer valuation than the S&P 500 index's P/E ratio of 31.

Should the valuation scare off investors?

Between Dutch Bros and Starbucks, I'd favor the former for its better growth prospects. But is the stock too expensive?

The owner and franchisor of drive-thru beverage shops continues to grow its restaurant base. It ended last year with 1,136 locations, compared to 982 at the end of 2024. And it's just scratched the surface, considering the Northeast and Midwest remain uncharted territory. Management expects to open at least 181 locations this year.

It's not merely expanding at the expense of profitability, either. Dutch Bros' 2025 comps increased 7.7%, with higher traffic contributing 5.4 percentage points. Management projects a 3%-5% comps increase for 2026.

The strong 2025 sales increase helped drive its operating profit 51.9% higher to $161.2 million. Clearly, Dutch Bros' beverages, which it aims to deliver quickly with an emphasis on customer service, have resonated strongly with people. However, from a pure valuation perspective, it's tough to buy a stock selling at 90 times earnings.

One way to even out your purchase price is to employ a dollar-cost-averaging buying strategy -- investing the same amount at regular intervals.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Dutch Bros and Starbucks. The Motley Fool has a disclosure policy.