This High-Growth Coffee Stock is Massively Mispriced for the Next Decade

I'll always remember my first exposure to Dutch Bros (NYSE:BROS). I was traveling cross-country with my now-wife when, on a whim, we stopped at this windmill-looking coffee shop. Little did I know it was part of a massive and fast-growing chain, or that it would end up being some of the best coffee I'd ever had.

Five years later, and Dutch Bros looks more and more like a scaled and successful restaurant chain hiding in "early stage growth" clothing, and the stock still prices it as if the model might not work.

The investment opportunity for the next decade is less about hoping Dutch Bros can grow into greatness and more about recognizing that it is already running a mature playbook while the market clings to an outdated risk profile.

In the third quarter of 2025, Dutch Bros generated roughly $424 million in revenue , up about 25% year over year, with systemwide same-shop sales rising 5.7% and company-operated comps up 7.4%.

Transaction growth did most of the work, with system transactions up 4.7% and company-operated transactions up 6.8%, marking the fifth straight quarter of positive transaction growth. This means the company is growing because more customers are making purchases, both across its whole system and at its own stores.

Company management also opened 38 new shops in Q3 alone, 34 of them company-operated, bringing the system to just over 1,080 locations and keeping the new-store engine firmly in high gear.​

Image source: Getty Images.

The real margin story

What made 2025 different was that this growth is translating into steadily improving earnings power rather than a "grow now, figure it out later" profile.

More pessimistic investors are worried because profit margins at company-run shops fell from about 29.5% to around 28%. This happened because drinks, food, and packaging all cost more, a trend that's hitting all restaurant stocks .

But Dutch Bros' recent results tell a different story: overall profit margins are getting better even as overhead costs grow and stores deal with higher costs.

At its first Investor Day in March 2025, the company shared a long-term plan. It wants to grow revenue by about 20% a year and eventually push shop-level margins close to 30%, all while still investing in its stores.

In simple terms, the current margin pressure doesn't look like a big long-term problem to me. It looks more like a short-term choice. Dutch Bros is choosing to spend more now on wages, food, and technology in order to sell more drinks per store and raise average order size, with the goal of improving margins again as the business gets bigger.

A decade-long unit runway is now underwritten

By the end of last year, Dutch Bros had grown to more than 1,000 shops across 24 states and entered six new states just that year, yet management is already planning for more than 2,000 locations by 2029 and sees room for several thousand over time.

The CEO has even talked about roughly doubling the store base in four years and eventually reaching around 7,000 shops, which suggests the company is still in the middle of its growth story, not near the finish line.

Just two weeks ago, the company agreed to acquire the 20-unit Clutch Coffee Bar chain across the Carolinas, closing and renovating the stores to reopen as Dutch Bros as part of its plan to grow to over 2,000 shops by 2029.

What's different now about Dutch Bros is the quality of that growth. Average unit volume (annual sales per store) has climbed to about $2.08 million , a sign that newer locations are doing well enough to support the system rather than weighing it down.

I find that many investors view Dutch Bros as just a drive-thru expansion story, but 2025 showed it becoming more of a multi-surface brand. It's a brand that makes money in several ways from each customer. It's a brand that is expanding across the East Coast.

The company is also testing hot food in over 150 shops, where early locations are seeing higher average tickets and more traffic, with plans to roll this out more broadly by the end of 2026 as new stores are built with the right kitchen setup.

Outside of its stores, Dutch Bros has moved into consumer packaged goods, partnering with Trilliant Food & Nutrition to sell branded coffee and related products in retail channels. These newer efforts are not the main reason to invest, but they increase how much each customer can spend over time and reduce pressure to rely solely on building new drive-thru locations to grow.

The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy. Micah Zimmerman has no position in any of the stocks mentioned.