Dutch Bros Shares Soar on Outlook. Is It Too Late to Buy the Stock?

Shares of Dutch Bros (NYSE: BROS) were soaring after the coffeehouse operator reported strong fourth-quarter results and issued upbeat guidance. The stock is up nearly 200% over the past year and more than 50% year to date.

Let's take a closer look at Dutch Bros' results and whether or not it is too late to buy the stock.

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Strong expansion ahead

More than anything, Dutch Bros is an expansion story. The company opened 151 new stores in 2024, of which 128 were company owned, including 32 total stores and 25 company-owned locations in Q4. It ended the year with 982 locations, of which 670 were company owned.

Meanwhile, it plans to open at least 160 new locations in 2025. That would equate to about 16% unit growth. Meanwhile, it says it plans to accelerate unit growth starting in the second half of the year.

Dutch Bros' newer concept stores are on the smaller side, generally between 800 square feet to 1,000 square feet, with multiple drive-thru lanes served by one window and a walk-up window. At the time of its IPO in 2021, its year-two cash-on-cash returns were between 35% and 75% depending on whether it used a build-to-suit arrangement (the developer managed and was accountable for the cost of the project and it had higher rents) or a ground lease (Dutch Bros would build the building itself and it would have lower rent). That's an attractive return, and the company has been able to fund its new openings with its operating cash flow.

The company's store expansion helped lead to a 35% increase in Q4 revenue to $342.8 million. That was well ahead of analyst estimates looking for revenue of $318.8 million.

Same-store sales climbed 6.9%, with transactions increasing 2.3%. More importantly, company-operated comparable-store sales soared 9.5%, with transactions up 5.2%. Company-owned same-store sales ultimately are a bigger driver of revenue than franchise same-store sales. The company credited innovation and successful limited-time offerings (LTOs) for the strong sales.

Dutch Bros said that 96% of its locations now have mobile ordering and that about 8% of its orders now come from mobile devices. It also highlighted the success it is seeing with its rewards program, with 71% of transactions coming from rewards members.

Company-operated store gross margins, meanwhile, climbed 280 basis points to 21.4%, despite an increase in coffee prices. Expanding gross margins can help lead to strong profitability metrics.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 41% year over year to $48.8 million, while adjusted earnings per share (EPS) climbed 75% from $0.04 to $0.07. That easily outpaced the $0.02 in adjusted EPS that analysts were expecting.

Looking ahead, the company forecast 2025 revenue to be between $1.555 billion and $1.575 billion, representing growth of 22% at the midpoint. It is looking for same-store sales to be between 2% and 4%, and adjusted EBITDA of between $265 million and $275 million.

It said its initial food tests are encouraging and that it understands many people want food with their morning coffee, and that it may be missing out on beverage orders from people who are not satisfied with its current food offerings. As such, it will expand its food test with an eye toward not impacting baristas' job satisfaction or throughput.

Image source: Getty Images.

Is the stock still a buy?

Dutch Bros has been doing a great job of driving same-store sales, while increasing its food offerings is a big opportunity. Food is currently only 2% of its sales, compared to Starbucks, where food represented 19% of its sales last quarter.

Meanwhile, with fewer than 1,000 stores, the company has a long runway of expansion ahead of it. By comparison, Starbucks had 11,242 company-owned locations and 18,537 total stores in North America at year-end.

Last year, there were times when Dutch Bros traded at 3 times or under on a forward price-to-sales (P/S) ratio and at a similar or lower level than Starbucks. However, with the jump in its share price, it now trades around 7 times its 2025 estimates, which is more than double that of Starbucks.

Dutch Bros has a lot of solid growth in front it with expansion and food helping drive same-store sales. However, the stock is no longer the bargain it was. As such, I would not chase the stock at these levels.

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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. The Motley Fool has a disclosure policy.