Shares of coffee chain stock Dutch Bros (BROS -1.04%) gained 19% in December according to data provided by S&P Global Market Intelligence. There was no significant news, but the Federal Reserve announced that it would begin to cut interest rates in 2024, and that sparked overall market enthusiasm, especially for great growth stocks.

A compelling path toward growth

Dutch Bros is a chain of coffee shops with a friendly, community vibe that's focused on great customer service, custom-crafted beverages, and speedy delivery. This has been a recipe for success, and the company is rapidly expanding. It operates 794 stores as of the end of the 2023 third quarter, with plans for 150 total in 2023 and annually, with the expectation that it can reach 4,000 over the next eight or so years.

This has led to robust revenue growth despite the overall downcast economy. Revenue increased 33% over last year in the 2023 third quarter, mostly due to new store openings, but also to price increases.

The company has struggled a bit with generating higher comparable-store sales (comps) as people cut back on frivolous expenses in the inflationary environment, and for many people, that includes expensive cups of coffee. However, along with price increases, comps growth has started to rebound, and comps increased 4% year over year in the fourth quarter. That's a far cry from the near 10% Dutch Bros was reporting before inflation made specialty coffee a luxury, and this is something investors need to keep an eye on.

On the positive side, Dutch Bros has posted several consecutive quarters of net income after several quarters of losses. Contribution margin and gross margin are expanding, and between new stores opening and improving profitability even at this point, Dutch Bros looks like it could have a long growth runway with high profitability at scale.

It recently announced that a new CEO is taking over, and she's an experienced executive who could bring the company to a new level in the way its founder-leader may not have able to.

A bargain at the current price

Dutch Bros has been a public company for about two years, and its stock is trading below its first-day closing price. It has tons of opportunity, but investors have been nervous about its recent poor comps and varied profits.

However, it's making positive changes and is trading at a low valuation of 1.9 times trailing-12-month sales, and it could be a big winner in 2024.