Dutch Bros: Upside Potential Remains High If Growth Remains

Summary

• Dutch Bros has grown revenue at a CAGR of +42%, underpinned by store growth of +22%. The company’s trajectory remains strong and is underpinned by commercial development.
• Management is refining its offering and maintaining its focus on its key competitive advantages, namely convenience and choice, allowing for brand development.
• We see scope for revenue to more than double in the next 5 years, with lower store and revenue per store growth than achieved historically.
• BROS appears on track to exceed its mature peers’ margins while delivering outsized growth. The biggest risk to the company is funding its expansion.
• BROS’ valuation is attractive in our view, in part due to the equity cost to fund the company. This represents value in our view.

hapabapa

Introduction and thesis

Dutch Bros (NYSE:BROS) is a rapidly growing coffee chain headquartered in Grants Pass, Oregon. Founded in 1992 by brothers Travis and Dane Boersma, the company operates a unique drive-thru model that focuses on providing high-quality coffee, beverages, and customer

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.