Starbucks (NASDAQ: SBUX) has been a massive wealth creator for long-term investors. In the last 10-years SBUX stock has generated close to 500% in cumulative gains compared to the S&P 500 returns of 343%.
Starbucks has 33,800 stores located all around the world and the company reported revenue of $8.1 billion in Q4 of fiscal 2021 (ended in September) which was increase of 31% year over year. Comparable store sales rose by 22% in the U.S. and 17% in international markets. The company’s operating income rose over 200% to $4.8 billion in Q4 of fiscal 2021.
The Starbucks Rewards which is a loyalty program saw the number of memberships rise to 25 million in the U.S., an increase of 28% year over year. A stellar performance in the September quarter allowed Starbucks to increase its quarterly dividend to $0.49 per share, up from $0.45 per share, indicating a yield of 1.8%.
Starbucks remains a top growth stock as its expected to increase total store count to 55,000 by the end of fiscal 2030. Its revenue is forecast to increase by 12.3% to $32.65 billion in fiscal 2022 and by 8.8% to $35.5 billion in fiscal 2023. Comparatively, adjusted earnings per share is forecast to rise at an annual rate of 33.7% in the next five years.
We can see that SBUX stock is valued at a forward price to sales multiple of just under 4x and a price to earnings ratio of 27.8x which is very reasonable given its growth estimates.
Dutch Bros poised to outpace SBUX stock
While Starbucks has increased shareholder returns at an enviable pace, one stock that is expected to outpace SBUX is Dutch Bros (NYSE: BROS). A company that went public in September 2021, Dutch Bros’ IPO was priced at $23. The stock is now trading at $52.84 valuing it at a market cap of $2.63 billion.
Dutch Bros. offers hot and cold expresso-based beverages as well as cold brew coffee products including Blue Rebel energy drinks, tea, lemonade and other beverages, through its network of company-operated shops and online channels.
Dutch Bros. recently reported its Q3 earnings and its sales grew by 49.8% year over year to $129.8 million. The company’s adjusted net loss stood at $0.15 per share. Comparatively, Wall Street forecast Dutch Bros sales at $124.88 million and adjusted loss at $0.20 per share. We can see that Dutch Bros. beat consensus revenue and earnings forecasts in its first quarter as a publicly listed entity. It opened 33 new locations in Q3 taking total store count to 503.
In Q4 of 2021, Dutch Bros forecast sales between $125 million and $128 million compared to consensus estimates of $121.2 million. Its same store sales are forecast to increase by mid-single digits in Q4. The company has also forecast adjusted EBITDA between $12.5 million and $13.5 million in the quarter ending in December.
The growth story for Dutch Bros is far from over as it intends to open 4,000 locations in the U.S. Its sales are expected to increase from $238.4 million in 2019 and $327.4 million in 2020 to $485 million in 2021 and $670 million in 2022. Comparatively, adjusted earnings is forecast to expand from $0.21 in 2021 to $0.38 in 2022.
Given these growth rates, BROS stock is valued at a forward price to 2022 sales multiple of 3.92x and a price to earnings ratio of 139x. Its evident that similar to other high growth companies, Dutch Bros. is sacrificing profitability for top-line expansion.
Analysts tracking BROS stock have a 12-month average price target of $69 which is almost 30% higher than its current trading price.
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