1 Top growth stocks fall 60%, expected to rise in 2024

Investors are feeling optimistic after a strong finish to 2023. S&P 500 Even last year, many great stocks are still trading at low valuations and below their previous highs. Don’t miss your chance to buy bargains in the market right now, before the tide lifts more stocks.

Dutch Brothers (bros -6.65%) The company may not be well known outside of the states in which it operates, but if you’re interested in quality investments, you should know better. Dutch Bros stock trades 60% below its all-time high, with a price-to-sales ratio below 2, but could surge this year. Here’s why:

A simple formula for success

Dutch Bros operates a chain of coffee shops similar to: Starbucks But the feeling and atmosphere are different. With a high level of customer service and a focus on speed, we position ourselves as a fun and friendly alternative. As of the end of the third quarter of 2023, it had 794 stores in 16 states, and although it opened 39 new stores in the quarter, it has serious expansion plans. It has a huge following at its current location and is a concept that could translate well across the country. Management sees opportunities for 4,000 locations over the next 10 to 15 years.

New stores were essential to achieve high growth even in an inflationary environment. Third-quarter sales increased 33% year-over-year, and the company’s aggressive store goals will sustain this growth for the foreseeable future.

making customers happy

One problem Dutch Bros has faced recently is declining comparable sales growth. In the restaurant industry, comparable sales, or comps, are often the deciding factor between a great company with future potential and a shabby company with weak prospects. For Dutch Bros, which reports this number as “same-store sales,” the metric measures the change in sales at locations that have been in business for at least 15 months. Same-store sales tell investors how a company is growing its business in existing locations, excluding the effects of new store openings.

Comps growth was strong before high inflation began, but it recently slowed and fell into negative territory through the first quarter of 2023. It is now recovering and was up 4% in the third quarter. Management attributed the low configuration in part to a “fortification strategy” of opening multiple stores in one area to create high brand awareness and attract new customers. This strategy puts pressure on you in the short term, but results in higher overall sales growth and better long-term results (at least that’s the plan).

Movement toward profitability is likely

Dutch Bros successfully navigated a difficult environment with price increases and recorded its second consecutive quarter of profit. According to the most recent report, company-operated store contribution margin increased from 25.6% to 31.0% year over year.

Dutch Bros is well positioned to drive further improvement here as the economic environment appears to be improving. Meanwhile, founder and CEO Joth Ricci is stepping down, making way for seasoned restaurant industry executive Christine Barone to take over and take the company to the next level.

Buy Dutch Bros stock before it’s too late

Dutch Bros stock has underperformed the market with a 14% gain in 2023. However, a continued downturn is unlikely as the company implements an ambitious growth strategy. Consider buying Dutch Bros stock because its long-term prospects look very bright.