Should you buy Dutch Bros stock?
- 6 months ago
Dutch Bros stock analysis. BROS stock.
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By the end of March 2023, this number had increased to 716 (with 278 franchised shops & 438 that are company-operated). And management has ambitious plans for growth, it wants 1000 shops by 2025 and 4000 shops in 10-15 years time.
Looking at the latest financials, the company has a market cap of 5.3 billion dollars with 14 million of cash and 96 million of long term debt.
Revenue over the last 12 months is 784 million, adjusted ebitda is 47 million but the company recorded negative net income and negative free cash flow.
So the company is valued at 6.6 times revenue or 113 times ebitda with gross margins around 25%.
As a beverage drive-thru, Dutch Bros revenue is divided into 3 segments:
• Coffee makes up 50%
• Energy drinks including their own Blue Rebel brand makes up 25%
• And the other 25% is from teas, sodas and smoothies
The challenge with this impressive growth is continuing to find profitable locations and Dutch Bros margins cause some concern.
Their operating margin in 2019 was close to 13% but its fallen to zero over the last twelve months.
This was mainly due to an increase in rent and in the prices of raw materials, particularly coffee beans.
A key consideration for investors is whether the decrease in margins is a warning signal for things to come.
On one hand, the drop in margins may be part of the company’s strategy. Affordable prices and memberships are a good way to develop customer loyalty and drive growth which can be monetized down the road.
On the other hand, if Dutch Bros is unable to pass costs to the final customer, it means the company’s profits are too dependent on raw materials and management can do very little to impact margins.
#dutchbros #stockstowatch #stocks #investing
Join our newsletter for more ideas: https://www.overlookedalpha.com
By the end of March 2023, this number had increased to 716 (with 278 franchised shops & 438 that are company-operated). And management has ambitious plans for growth, it wants 1000 shops by 2025 and 4000 shops in 10-15 years time.
Looking at the latest financials, the company has a market cap of 5.3 billion dollars with 14 million of cash and 96 million of long term debt.
Revenue over the last 12 months is 784 million, adjusted ebitda is 47 million but the company recorded negative net income and negative free cash flow.
So the company is valued at 6.6 times revenue or 113 times ebitda with gross margins around 25%.
As a beverage drive-thru, Dutch Bros revenue is divided into 3 segments:
• Coffee makes up 50%
• Energy drinks including their own Blue Rebel brand makes up 25%
• And the other 25% is from teas, sodas and smoothies
The challenge with this impressive growth is continuing to find profitable locations and Dutch Bros margins cause some concern.
Their operating margin in 2019 was close to 13% but its fallen to zero over the last twelve months.
This was mainly due to an increase in rent and in the prices of raw materials, particularly coffee beans.
A key consideration for investors is whether the decrease in margins is a warning signal for things to come.
On one hand, the drop in margins may be part of the company’s strategy. Affordable prices and memberships are a good way to develop customer loyalty and drive growth which can be monetized down the road.
On the other hand, if Dutch Bros is unable to pass costs to the final customer, it means the company’s profits are too dependent on raw materials and management can do very little to impact margins.
#dutchbros #stockstowatch #stocks #investing