Predicting the Future Position of Dutch Bros Stock in a Half Decade
Predicting the Future Position of Dutch Bros Stock in a Half Decade
Dutch Brothers (BOSS 0.17%) is a modest coffee shop franchise with ambitious aspirations. It's expanded from a local presence to operating in 18 states, and the favorable responses in various locations suggest a promising future. As the company has spread nationwide, its stock has fluctuated, but it's up 68% in 2024, surpassing the market by a wide margin. Where might it be five years from now?
The Past Five Years
Dutch Brothers went public in 2021, but it's had a longer history. The company started in 1992 as a pushcart in Oregon.
As it expanded into numerous outlets, Dutch Brothers preserved its original culture of good times and good music. It's incorporated this into its brand as it transitioned into a large chain, bringing positive energy into each store with a laid-back and customer-centric atmosphere.
It had 503 stores when it went public, mainly in the West Coast, and has 950 as of the end of the 2024 third quarter, approximately doubling in three years. It opened around 150 stores in 2024 and aims to have around 4,000 stores over the next 10 to 15 years, implying an increase in openings.
The company has maintained strong revenue growth since its initial public offering (IPO), including 28% year over year in the third quarter. However, its same-store sales growth has been less consistent. This has been influenced by various factors in a challenging business environment.
Dutch Brothers kept pace with inflation by increasing its prices to match rising costs and continues to manage through a slowdown in consumer spending. Same-store sales growth has shown improvement and decline at different times, reaching 2.7% in the third quarter. The quarter also marked its best transaction growth in two years, suggesting that same-store increases aren't solely due to price increases.
The company has also transitioned from occasional profits to consistent profits, although it has a brief track record. It reported its first annual profit in 2023 and is on track to report another for 2024. Net income was $21.7 million in the third quarter, up from $13.4 million in 2023.
The Next Five Years
Investors became apprehensive when management mentioned earlier in the year that it would meet the lower end of its store opening plans for 2024. As it expands, Dutch Brothers has adjusted its real estate strategy, which led to some targeted locations not meeting the new criteria.
This may seem like a setback and cannot be overlooked. However, if the company can open new stores more strategically and efficiently, shareholders will benefit in the long run. Management has not yet provided 2025 guidance, but if its new plans are progressing smoothly, there should be more expansion plans for the new year, especially if the company still aims to reach its long-term store goals.
As it continues to open new stores in new regions, Dutch Brothers should have no trouble increasing its revenue. The more significant metric to monitor is the same-store sales growth. The company has largely managed under economic pressures and should find it easier to report same-store sales growth.
Dutch Brothers recently introduced mobile ordering across all its stores. As it opens new stores with mobile ordering integrated, it should boost both its top and bottom lines. The company is designing its newer stores to accommodate multiple types of ordering, from in-store and mobile to walk-up windows.
All of these operational advances should contribute to a growing bottom line. Wall Street anticipates earnings per share (EPS) of $0.45 in 2024, up from $0.30 last year, and $0.55 in 2025.
Dutch Brothers is scaling efficiently and should be larger and more successful five years from now. Investors who buy today should expect to see their investments grow at a potentially market-beating rate.
In light of its successful expansion and strong financial performance, Dutch Brothers has attracted interest from investors looking to capitalize on its growth potential in the field of finance and investing. With a strategic plan to open around 4,000 stores over the next decade and a consistent track record of strong revenue growth, Dutch Brothers is expected to continue its upward trajectory, potentially outperforming the market.
As Dutch Brothers expands its operations and integrates mobile ordering into its stores, experts in the world of finance and investing predict an impressive earnings per share (EPS) growth, with expectations of $0.55 in 2025, illustrating the significant potential returns for those who choose to invest in the company's future.