Think It's Too Late to Buy Dutch Bros? Here's the Biggest Reason Why There's Still Time.

High-energy coffee shop operator Dutch Bros (NYSE: BROS) has been very kind to investors in 2024. As of Dec. 13, the stock has gained 75% in 52 weeks. The company's sales are soaring while bottom-line earnings are growing, in both cases much faster than expected by your average Wall Street analyst.

But the coffee-house stock focused on a friendly drive-through experience is not every investor's cup of tea. The financial results are strong, and growth investors expect the revenue surge to continue for the foreseeable future. At the same time, many value investors take one look at Dutch Bros' valuation ratios and walk away. Trading at 176 times earnings, this lofty valuation is supported by rapid growth and could collapse quickly if Dutch Bros slows down.

I understand the cautious attitude and applaud investors who take valuation issues seriously. But I also think the growth-oriented crowd has the right idea, for one crucial reason: Dutch Bros is writing the early chapters of a very ambitious expansion story right now.

Expect many years of rapid store growth

The company has 950 locations right now, up 20% from 794 stores a year ago. Management expects to open about 30 more drive-through shops by the end of the year. Another 160 shops are planned in 2025, and the expansion should speed up even further in 2026.

In the long run, management aims for "at least 4,000 Dutch Bros locations in the United States" -- a target included in its initial public offering (IPO) filings three years ago. If anything, the smooth rollout of Dutch Bros into seven more states across the country could boost the company's location-count goals over time.

Digital marketing adds fuel to the expansion fires

And Dutch Bros is leaning into this growth effort in many ways. Beyond opening new stores in far-flung cities, the company has launched a generous digital marketing plan and is doubling down on that budget to support recently introduced local markets. The Dutch Rewards customer loyalty program plays a large part in this endeavor.

Long story short, a growth-based investment thesis for Dutch Bros makes a ton of sense because the company is running an ambitious and effective expansion plan. Even so, it should take many years to saturate the projected American market -- and then there could be international ambitions in the even longer run.

So you're not too late to invest in Dutch Bros, as long as you can tolerate lofty valuations and some harsh volatility along the way.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.