Dutch Bros (BROS 3.20%) is an up-and-coming coffee shop chain that's establishing a strong brand presence and picking up loyal fans. It looks like it has a long growth runway, but does that make it a smart buy for 2026?
Dutch Bros in 2025
Dutch Bros' stock has been up and down over the past few years as it toggled between high growth and growing pains. It has consistently reported healthy sales increases, and it has become reliably profitable. It's also spending heavily on expanding its store network, but it's starting to generate positive free cash flow.
Like the rest of its industry, it has been dealing with a challenging operating environment as people struggle with the impacts of inflation on their budgets, which is leading more of them to curtail discretionary spending. In its favor, Dutch Bros' products are lower priced than Starbucks', which makes them more attractive in this economic climate.
Image source: Dutch Bros.
Dutch Bros' results have generally been well received by the market, and the company demonstrated strength in the third quarter. Sales increased 25% year over year to $423.6 million, and same-shop sales were up 5.7%. Management noted that transaction growth was 4.7%, reflecting that its growth wasn't just coming from higher prices, but also from stronger engagement. Net income was up from $21.7 million in the prior-year period to $27.3 million, and contribution margin, which measures how efficient the company is at the store level, was 27.8%, up 1.7 percentage points year over year.
The company is still in growth mode, and on course to open at least 160 stores this year. It already has more than 1,000 locations, but relative to its long-term plans, it's still in an early stage of its growth arc, and it's refining its model, which largely uses stores that serve customers primarily via drive-thrus and walk-up windows. It has a few stores with dining rooms, too, as well as some that solely serve via walk-up windows. And it's experimenting with a modestly expanded food menu to boost its sales.
Although the company is performing nearly flawlessly, the stock has been, relatively speaking, mediocre this year. It's up by just over 16% -- almost precisely the same as the rise of the S&P 500.
NYSE: BROS
Key Data Points
Opportunities next year and beyond
Management is planning to accelerate store openings over the next few years with the target of reaching 2,029 stores by 2029 -- about double today's count. That would boost revenue even without same-store sales growth, but look for same-store sales growth as an indication of how the company is building its brand and generating consumer loyalty. Its plan is to open new stores following a rigorous formula that maintains efficiency and keeps its healthy margins. If it can manage that, the stock should gain ground.
However, currently, Dutch Bros stock is expensive, trading at a forward, 1-year P/E ratio of 68. At that level, any headwinds or negativity could lead to a meaningful drop. It also helps explain why the stock hasn't outperformed this year despite the strong results; a fair amount of hoped-for growth was already baked into the stock price.
In the long term, though, Dutch Bros stock could prove to be a smart growth component within a diversified portfolio.
