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dutch brothers (Brother 0.32%) The company appears to have gotten off to a false start as a publicly traded company. Today, it’s selling at a 68% discount from the all-time high it set shortly after going public in fall 2021.
Still, even as investors bid on the company’s stock price, Dutch Brothers remained squarely focused on its national expansion plans, rapidly adding coffee shops and increasing profits. This growth, along with other factors, should bode well for coffee stocks over time.
Dutch broth stock status
Dutch Brothers appears to have been a victim of the 2022 bear market. This was unfortunate timing for the company, as its stock was launched near the peak of the bull market.
But the stock’s price action appears to have the characteristics you’d expect from a bear market stock. Dutch Brothers struggled in range trading after falling sharply in 2022 as the economic downturn weighed on investor confidence.
Additionally, the coffee market is highly competitive.In addition to industry giants Starbucks, it must also compete with privately held chains like Dunkin’ and countless independent coffee shops. moreover, mcdonalds has begun building a beverage-focused chain called CosMc’s, and its first stores in the Chicago area are showing early signs of success.
In this environment, Dutch Brothers stock has risen more than 10% since last year, but was up more than 40% at one point in early 2023.
BROS data by YCharts.
Nevertheless, Dutch Brothers continued to operate and expand as if largely unaffected by these challenges. Over the past 12 months, he added 153 stores, bringing the number of stores to 794 at the end of the third quarter, an increase of 24%.
Dutch brothers in numbers
The company’s financial performance shows the fruits of its expansion. His revenue for the first three quarters of 2023 was up 32% year over year to his $712 million. This includes a 4% increase in same-store sales.
Additionally, it began reporting profitable quarters in 2022, which primarily continued into the following year. Net income for the first nine months of 2023 was $14 million, while in the same period last year he had a loss of $16 million.
So even with its lower share price, Dutch Brothers has become more attractive, and that trend should continue. Management forecasts 2023 sales of between $950 million and $1 billion, representing 32% growth at the midpoint.
Admittedly, the company’s forward earnings multiple is currently quite high at 87x, but that ratio is skewed by its recent turn to profitability. However, its price-to-sales (P/S) ratio is a reasonable 2. This is significantly cheaper than rival Starbucks, which has a P/S ratio of about 3.
The coffee chain may offer a more attractive investment opportunity than the market leader, as Dutch Brothers’ relatively small size allows for higher growth on a percentage basis.
Consider Dutch Brothers Stock
Dutch Brothers stock is in a solid position to deliver returns for investors. Even as investors sold their shares, the company continued to press ahead with aggressive expansion plans. The stock has also recently become more profitable and has a low P/S ratio, making this stock even more attractive.
The competitive environment for the company may become even more intense as competing coffee shops continue to emerge. However, Dutch Bros. is adding about 150 stores every 12 months, and its rapid growth will likely boost its stock price over time.
Will Healy has no position in any stocks mentioned. The Motley Fool has a position in and recommends Starbucks. The Motley Fool has a disclosure policy.
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