Investors did not react positively to Dutch Bros (BROS 5.31%) stock following the release of the company's earnings report for the first quarter of 2022. Disappointment in same-store sales levels led to a 12% sell-off in the next trading session, taking the stock close to its record lows.

Nonetheless, Dutch Bros is maintaining a rapid pace of expansion, a factor keeping overall revenue growth at high levels. Despite struggles with same-store sales, that expansion is likely a compelling reason to treat the dip in the coffee stock as a buying opportunity. A closer look at the Q1 results reveals why.

The Q1 report

For all of its problems, the rapid growth is continuing for Dutch Bros. Revenue came in at $197 million, rising 30% versus the first quarter of 2022. Continued expansion brought about the increase, which included 144 new shop openings over the previous 12 months.

The sell-off in the stock was likely a function of its same-store sales. Despite rapid revenue growth, Dutch Bros reported a 2% decline in same-store sales. That was the second consecutive negative result for same-store sales, though the company had previously maintained positive same-store sales amid economic uncertainty and rising costs.

In regard to the bottom line, Dutch Bros reported a net loss of $9 million, down from a loss of $16 million in the year-ago quarter. The company kept the cost of revenue increases and the growth of most expenses below the pace of revenue growth, allowing it to reduce its losses.

Moreover, Dutch Bros reiterated its 2023 revenue outlook between $950 million and $1 billion, a 32% annual growth rate at the midpoint. It also held to the estimate that same-store sales would grow in the "low single digits" this year, implying the drops in same-store sales will not persist.

Making sense of Dutch Bros stock

Given that outlook, the falling stock price may imply an overreaction to the same-store sales reductions. For one, the aforementioned 2% drop in same-store sales affected just 70% of its store base. Since the other shops were open for less than a year, that figure does not include a large number of its locations.

Additionally, the company mentioned that it benefited from Omicron in early 2022 as more customers sought to minimize human contact. That may have skewed the year-over-year growth in the most recent quarter.

Its results also did not stop what looks like a march toward profitability. The $9 million in quarterly losses amounted to a 44% drop over the last year. If it maintains that pace of loss reductions, Dutch Bros could turn profitable soon.

Moreover, Dutch Bros reiterated its commitment to nationwide expansion in its Q1 report and Q1 2023 earnings call. It told shareholders it would open at least 150 new locations in 2023. It also held to its long-term goal of 4,000 shops. That factor should almost ensure significant revenue growth for years to come.

Furthermore, thanks to the drop in the stock, Dutch Bros stock looks more compelling from a valuation perspective. With the decline in the stock price, it now sells at a price-to-sales (P/S) ratio of 2, a level near a record low for the stock. Interestingly, by that measure, it has become cheaper than Starbucks, which sells at close to 4 times sales.

Indeed, Starbucks is a more recognizable name with an exponentially larger footprint. However, Starbucks depends heavily on China, a country with increasingly poor relations with the U.S., to drive its expansion. In many ways, Dutch Bros is just getting started, and it can derive its growth from the more stable U.S. market for years to come, a factor that should reassure investors.

Consider Dutch Bros

When looking at Dutch Bros' financials and stock price action, it appears that the recent plunge in the stock is a buying opportunity. Although no Dutch Bros bulls want to see same-store sales decline, it seems that massive growth and temporary market conditions skewed this result.

Additionally, the company's expansion plan remains on track. While investors should keep a close eye on same-store sales growth, they should also keep in mind the discounted stock price as it closes in on profitability. At this point, those numbers appear more important than a modest drop in same-store sales.