Starbucks Is Up 24% This Year While Dutch Bros Is Down 24%. Here's Why Only 1 of These Coffee Stocks Is a Buy in September.

Venerable Starbucks (NASDAQ: SBUX) and relative upstart Dutch Bros (NYSE: BROS) have seen their stock prices go in different directions this year. The former had a share price gain of more than 24%, while the latter lost about 24%.

Is the market sending a signal about future prospects, or are investors focusing too much on the short term? To make that determination, investors need to take a closer look at each company's business prospects in conjunction with their valuations.

Let's examine Starbucks and Dutch Bros to see which one currently offers the better investment potential.

Starbucks' impressive revitalization

Starbucks' board of directors hired Brian Niccol in 2024 to turn around sales. With a focus on customer service, revamping restaurants, menu changes, and continued expansion, the company has made progress.

That's not easy for a company that's been around for more than half a century. It currently has more than 41,000 company-owned and licensed locations around the world.

Impressively, Starbucks has produced four straight quarterly same-store (comps) increases. That includes its fiscal third-quarter's 7.9% gain. Importantly, higher traffic accounted for 4.2 percentage points, with increased spending responsible for the balance. This covered the period that ended on June 28.

Broken out, North America had an 8.1% increase in comps, and its international locations posted a 5.7% rise. And management expects this momentum to continue for the fourth quarter. It anticipates U.S. comps growth of at least 6.5% and almost 6% growth globally.

Upstart Dutch Bros looks to sustain growth

Founded in 1992, Dutch Bros has grown quickly by operating drive-through locations focused on serving high-quality beverages quickly and with strong attention to customer service.

It has 1,225 franchised and company-operated locations as of June 30. That's up from 1,136 restaurants as of Dec. 31. These are entirely located in the United States, although it has no presence in certain states, particularly in the Northeast and Midwest. Management expects to reach 2,029 restaurants in 2029.

You can see how much its concept has resonated with consumers by looking at its results. Dutch Bros continues to increase comps at a good clip. Its second-quarter comps grew 5.8%, with higher spending responsible for 4.1 percentage points. Management expects a 5% to 6% increase for the year.

Image source: Getty Images.

The decision

Before making an investment decision, it's important to look at each stock's valuation. Neither one looks like a bargain, but that shouldn't dissuade you from one of them.

Starbucks' shares have a price-to-earnings (P/E) ratio of 60, although that's down from 70 at the start of the year. Dutch Bros' stock trades at a P/E multiple of 66. Still, that's down from 100, which likely played a role in the stock's downfall this year despite still impressive sales growth. Meanwhile, the S&P 500 index has a P/E ratio of 26.

Those individual stock valuations, particularly in comparison to the market, seem like you should steer clear of both. However, I like one in particular despite the rich valuation.

Starbucks has done a good job turning around its business and should be applauded. However, the expansion opportunities just aren't the same.

Dutch Bros stands out for its growth opportunity. It still has a vast opportunity domestically, and it hasn't even tapped the international market.

The company's methodical approach to expansion has been paying off. Notably, management recently walked away from the bidding for Salad and Go's 65 locations in Arizona, Nevada, Oklahoma, and Texas. Some may balk at the decision, but I applaud management sticking to a financially disciplined approach rather than increasing its offer.

With a financially responsible growth plan, I believe long-term investors will find that paying the higher multiple for Dutch Bros is worthwhile.

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.