Market Sell-Off: 1 Growth Stock Down 25% to Buy Right Now

The recent market sell-off has left many investors scrambling to find the next big winner. With growth stocks taking a hit, it's crucial to identify those with strong fundamentals and significant growth potential. One such stock that stands out is Dutch Bros (BROS), which has seen its stock price drop 25% from its all-time high. Despite this downturn, Dutch Bros presents a compelling investment opportunity due to its robust growth drivers and strategic expansion plans.



Dutch Bros' growth story is centered around its expansion strategy. The company ended 2024 with 982 locations, of which 670 were company-owned. Operating in just 12 states, primarily in the western U.S., Dutch Bros has significant room for geographic expansion. For instance, Oregon, where the company was founded, has 155 locations, and California has 149. In comparison, Starbucks operates 17,049 total locations in the U.S., including over 3,000 stores in California alone. Dutch Bros' strategy of building new locations that are relatively small and cost-effective, with most new builds falling between 800 square feet and 1,000 square feet, and relying on walk-up windows and multiple drive-thru lanes, allows for strong returns on investment. The company added 151 new stores in 2024, with plans to increase that to around 160 new locations in 2025, representing about 16% unit growth. Most of this growth is expected in the second half of 2025 as the company optimizes its real estate strategy.

Another key growth driver is same-store sales growth. Dutch Bros reported a 6.9% increase in same-store sales in the last quarter, driven by price increases and a 2.3% rise in transactions. Company-operated stores performed even better, with comparable-store sales climbing 9.5% and transactions up 5.2%. The introduction of mobile ordering, now available in 96% of its stores, has also contributed to this growth, although only 8% of orders currently come from mobile devices, indicating room for further expansion. Additionally, Dutch Bros is exploring the introduction of food items, which currently account for only 2% of its sales compared to nearly 20% for Starbucks. The company has been testing new food concepts with good initial results, aiming to address the demand for food with morning coffee without requiring customers to stop at multiple places. This initiative could significantly boost same-store sales in the years ahead.

The recent market sell-off has dropped Dutch Bros stock 25% below its all-time high, giving it a forward price-to-sales (P/S) ratio of 4.9 times analysts' 2025 estimate and 4.0 times their estimate for 2026. This compares to an approximately 3.0 multiple for Starbucks for both periods. Despite commanding a premium, Dutch Bros' growth opportunities over the next 10 to 15 years are much greater than those for a mature operation like Starbucks, making it a potentially attractive entry point for investors bullish on this regional-to-national growth story.



In conclusion, Dutch Bros presents a compelling investment opportunity despite the recent market downturn. With its strong expansion strategy, solid same-store sales growth, and innovative initiatives like mobile ordering and food offerings, Dutch Bros is well-positioned to capitalize on its growth potential. Investors looking for a growth stock with significant upside should consider adding Dutch Bros to their portfolios.