Dutch Bros - Rapid expansion and sales growth
1. Dynamic network growth:
- Store expansion: $BROS has almost doubled the number of stores to 912 in the three years since its IPO in 2021.
- Strong Revenue Growth: $BROS has grown revenue 30% or more every quarter since IPO, with same-store sales also growing 4% in Q2 2024.
2. Valuation and profitability challenges:
- High Valuation: $BROS stock was valued high post-IPO, which combined with lower revenue growth over the past 18 months has hampered its market growth.
- Weak Net Profit: The company is just above breakeven, causing some investors to seek higher margins.
3. Key contributory margin metric:
- Contribution Margin: This metric rose to 30.8% last quarter, which puts $BROS on par with the world's best restaurants like Chipotle Mexican Grill. This suggests the potential for high profitability with continued expansion.
4. Attractive market valuation:
- Price to Sales (P/S) Ratio: With a P/S of 2.4, $BROS trades fairly given that it is growing faster than established leaders like Starbucks.
- Long-term Goal: The company plans to reach 4,000 stores, which could lead to a higher stock valuation.
Dutch Bros continues to expand dynamically and is showing strong revenue growth, making it an attractive investment opportunity. Although the stock's value is subdued for now due to its high valuation and tight profitability, its growing contribution margin and ambitious expansion plans suggest the potential for significant value appreciation in the future.
I honestly wasn't that interested. Do you think you could always write in a short sentence at the beginning of these lesser known stocks what the company does and what products/services it offers? For me, that would be a great addition, it makes it easier to navigate, as knowing what the company does and what sector it's in, I can judge it against competitors for example.
For a company that has only been on the market for a few years, it has held its price quite well. It's trading only a few percent below its IPO value, and its sales and business, as you wrote, have grown significantly since then. Nice prospective investment in a growth portfolio.