Coca-Cola (KO) manages a portfolio of beverage brands, distributing its drinks through a global network of franchise partners. Dutch Bros (BROS -1.04%) runs a chain of drive-thru coffee shops with a fun and energetic vibe, mainly in the western part of the United States.
Both companies focus on beverage sales. Beyond that shared quality, they could hardly be more different. So which one is the better investment idea today?
Let's compare and contrast Dutch Bros and Coca-Cola from an investor's perspective. Which one will fizz, and which will just fizzle?
Two beverage stocks by the numbers
|
Metric |
Coca-Cola |
Dutch Bros |
|---|---|---|
|
$259 billion |
$2.2 billion |
|
|
Trailing revenue |
$45 billion |
$913 million |
|
59.1% |
26.8% |
|
|
24.1% |
0.3% |
|
|
Trailing earnings |
$10.8 billion |
$2.5 million |
|
Trailing free cash flow |
$10.2 billion |
($109 million) |
|
Five-year compound annual growth rate (CAGR), sales |
6.4% |
47.5% |
|
24.2 |
753 |
Data sources: Finviz.com, Morningstar.com, and financial filings from each company. Data was collected after market close on Jan. 9, 2024.
Like I said, these two companies are worlds apart.
Coca-Cola is a mature industry giant. It collects dozens of billions of dollars in annual sales, converts nearly one-quarter of its sales into after-tax profits and free cash flows, and its top-line growth reflects its fully developed business model on a global scale -- there's no low-hanging fruit left to snag.
On the other hand, Dutch Bros is a fast-growing upstart with minimal earnings and a significant cash burn. The company is pouring heavy investments into a nationwide expansion, reaching as far east as Alabama and Kentucky in the most recently reported quarter. It's not a cheap strategy, and Dutch Bros has relied on follow-on stock sales to fill its cash coffers.
Coca-Cola is the real thing for value investors
Coke may be for you if you're looking for a stable and secure business titan with a world-class brand and predictable results. The stock is fairly affordable and tends to nestle at a stable price. Coca-Cola's share price stayed in the range of $51.55 to $64.99 over the last year -- a 26% swing from the bottom to the top.
Continued growth may come from effective marketing campaigns, the successful introduction of new flavors and beverage types, and more efficient business operations. Given Coke's global reach, each success story will be written in a mosaic of local markets and it's rare to see sudden changes for better or worse on a worldwide level.
Oh, and the company pays a generous dividend with a current yield of 3.1%. The annual payout has increased in each of the last 62 years without interruption, demonstrating that Coca-Cola is committed to giving shareholders a significant slice of its profits.
Growth investors love Dutch Bros
In the opposite corner, Dutch Bros is writing a growth story in large, bold, and colorful letters. Its brand is built around energetic customer interactions and a creative drink menu with everything from protein shots and energy drinks to a chocolate-flavored coffee called the "annihilator." The staff is coached to take and deliver orders with an overdose of friendly chatter, yet focus on keeping that blockbuster of a car line moving.
Investing in this company requires a very different mindset than the slow-and-steady approach of Coca-Cola owners. You must accept the market risk that comes with Dutch Bros' aggressive approach. The business is funded quite directly by shareholders, and the recent stock sale diluted existing Dutch Bros holdings by 30%.
And like any high-octane growth stock, these shares are prone to drastic swings in both directions. Dutch Bros stock rose 40% in January 2023 and 16% in December, but it also fell by 21% in September and 13% in February. This stock is not for the faint of heart.
Time to pick a winner
There isn't one absolute winner in this duel. Rather, Coca-Cola's stock may be perfect for one type of investor while Dutch Bros is more appealing to the diametrically opposite investor type.
In the end, only you know which of these stocks is the better fit for your investing style. And if you're not entirely sure yet, you can check up on your risk tolerance and then get back to this pressing question.
And of course, there's nothing wrong with owning shares of both Dutch Bros and Coca-Cola if you manage a sophisticated and diversified stock portfolio where several stock classes can serve different purposes.
Personally, I generally don't mind growth stocks but Dutch Bros' pedal-to-the-metal tactics are a little too harsh for my tastes. I'll certainly keep an eye on this interesting growth story as the coffee shop network expands from coast to coast, but Coca-Cola would be my first choice right now.
