Shares of handcrafted beverages chain Dutch Bros (BROS 0.10%) are up 35% this week as of 4 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.
Reporting third-quarter earnings, Dutch Bros beat analysts' expectations on both the top and bottom lines while offering improved guidance for the remainder of 2024. In addition to growing its store count and sales by 20% and 28% compared to last year, the company generated positive free cash flow (FCF) for the first time through the first three quarters of the year.
NYSE: BROS
Key Data Points
A significant milestone for Dutch Bros
Earning $184 million in cash from operations versus $179 million spent on capital expenditures so far in 2024, Dutch Bros generated positive FCF despite still being in hypergrowth mode. This is important for shareholders as it means the company is on the precipice of self-funding its store count expansion plans without diluting shareholders via new share offerings.
With management's stretch goal being to grow its shop count from 950 locations today to over 4,000 within 10 to 15 years, this ability to self-fund its expansion is crucial to the stock's long-term investment thesis.
In addition to reaching breakeven FCF, Dutch Bros announced that it is tiptoeing into the food business alongside its beloved beverages. After testing a few different menus at six shops, the company believes a more robust food strategy will be forthcoming over the next few years after seeing early success. With food only accounting for 2% of sales, this could prove to be a major development as well.
This combination of positive FCF, store count expansion plans, and the potential to add new food offerings make Dutch Bros an intriguing investment -- even with its price-to-sales (P/S) ratio of 7 being roughly double that of its peer, Starbucks.
