Investors rightfully feel fully caffeinated after the company’s stellar earnings.
Shares of quick-service coffee and beverage company Dutch Bros (BROS 11.79%) exceeded analysts’ estimates for its first-quarter results. As of 1:20 p.m. ET on Wednesday, Dutch Bros stock was up 11%.
Dutch Bros: Blending high growth with net profits
Entirely in high growth mode, Dutch Bros delivered a 39% sales increase in Q1, powered by the fact that its store count grew by 22% over the same time frame. However, these new stores didn’t account for all of Dutch Bros’ growth, with its same-store sales (SSS) rising by 10% during the quarter. This impressive growth occurred despite the challenging consumer spending environment that its behemoth peer Starbucks noted in its recent earnings call.
As promising as this fifth consecutive quarter of positive SSS growth was, the company’s streamlining profitability was even better. With its sales, general, and administrative expenses declining from 23.3% of sales last year to 16.8% today, Dutch Bros delivered a net profit margin of 6% in Q1.
In addition to this newfound profitability, Dutch Bros ranked in the top 10 of Forbes’ inaugural Best Customer Service list, highlighting that the company’s culture is proving to be a true differentiator.
Is Dutch Bros stock a buy?
Trading with a price-to-sales (P/S) ratio of 2 — compared to Starbucks’ mark of 2.3 — Dutch Bros’ plans to more than quadruple its store count over the next 10 to 15 years appear attractively priced. Considering that 57% of its stores reside in California, Texas, and Oregon, it isn’t a stretch to believe that there is a tremendous growth runway ahead of the company geographically.
With Dutch Bros recently named Gen Z’s favorite quick-service restaurant by Nation’s Restaurant News (a list Starbucks was notably missing from), the company looks well-positioned for years of growth at a reasonable valuation.
