Dutch Bros (NYSE:BROS) released its “preliminary” fourth quarter and 2021 numbers on Jan. 10 showing a very strong fQ4 and finish to 2021. When the final numbers come out expect to see BROS stock move substantially higher.
So far this year, the stock is slightly up in year-to-date (YTD). It ended 2021 at $50.91 and as of Feb 11, BROS stock closed at $51.79. This means it’s up 1.73% YTD.
This is actually better than most stocks. For example, the S&P 500 is down 7.62% so far YTD. And if the revenue and profit numbers come in better than forecast, BROS stock could jump even further.
Where Things Stand With Dutch Brothers
The preliminary results from Dutch Bros did not provide the exact revenue figures. The coffee maker and retailer said in its press release that revenue growth will exceed the upper end of forecasts.
Last quarter, the company had said that it expects Q4 revenue of $125 million to $128 million. So this implies that revenue will be close to $130 million or higher. This compares with $129.8 million in Q3 2021. So, although revenue will be higher year-over-year, its sequential quarterly growth will depend on how high over $130 million Q4 comes in.
Moreover, Dutch Brothers said that they opened 98 shops last year, surpassing their previous guidance of 92 shops. Moreover, they entered three new states: Texas, Oklahoma, and Kansas. They now expect to have 125 new shops in 2022. As it stands now the company has 538 shops across 12 states, mostly in the West and Midwest.
On top of this, Dutch Brothers’ same store sales grew 10.1% in Q4 and 8.4% for the year. Of the Q4 10.1% same store sales growth, the company-owned stores sales grew 11.5% in Q4, slightly better than the total.
Given these numbers I expect that sales will be up 10% or so on a YoY basis.
Where This Leaves BROS Stock
It’s hard to put an exact value on Dutch Brothers stock at least until we know their full Q4 and 2021 number. I expect the company will produce excellent earnings but without the exact numbers we can’t put a real value on these earnings yet.
So far, analysts expect that revenue will hit $492 million for 2021, and next year it is forecast to hit $693 million, according to Yahoo! Finance which uses Refinitiv’s analyst survey data. It represents a potential revenue growth rate in 2022 of 40.9% YoY.
Since Dutch Brothers has a market capitalization of $8.47 billion, it has a forward price-to-sales (P/S) of 3.74 times revenue for 2022. Given the company’s huge growth rate, the market is willing to give this high a multiple — at least as long as the growth lasts.
As a result, eight analysts surveyed by Refinitiv (as shown by Yahoo! Finance) have an average price target of $68.50, or 32% over today’s price. Moreover, Seeking Alpha‘s survey shows the very same price target.
These analysts must assume that Dutch Brothers’ growth is going to last a good while. That is why they have such a high price target.
What To Do
Most value-oriented investors will wait until the Q4 numbers come out, along with management’s updated guidance for 2022 growth.
That way they can judge whether the stock is overvalued or not, given its future growth prospects. Obviously, given the company’s ebullient preliminary earnings release growth must be continuing. Otherwise, management may have an obligation to issue a sort of profit warning along with the preliminary results.
Absent that warning, we can probably assume that growth is moving along just fine. You can’t give preliminary results without sort of leading investors on that growth is on track.
That is probably the main reason why BROS stock is doing better than most other stocks. Assuming this continues, expect to see the stock move higher this year.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com runs the Total Yield Value Guide which you can review here.
