The "Apple of Public Safety"

In this podcast, Motley Fool analyst Jason Moser and host Mary Long discuss:

• Axon earnings, and the headline that sent the stock down.
• What artificial intelligence looks like in policing.
• What success looks like for TJX Companies.

Then, Motley Fool analyst Emily Flippen and host Ricky Mulvey take a look at Dutch Bros, a fast-growing coffee chain with a sugary valuation.

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A full transcript follows the video.

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This video was recorded on Feb. 26, 2025

Mary Long: The party's over for some retailers, but not for all. You're listening to Motley Fool Money. I'm Mary Long, joined today by Jason Moser. J-mo, thanks for being here.

Jason Moser: Hey, Mary, thanks for having me.

Mary Long: I'm always thrilled when I get to talk to you on the show, but I especially appreciate you coming on today, because you've had quite the busy morning. You were talking to Axon President Josh Isner earlier today. That's probably a good place to start because Axon dropped earnings yesterday. We're going to air a part of your conversation on Friday's show. But before we dive into Axon's latest results, you want to give us a little teaser? Any highlights from your conversation with Josh this morning?

Jason Moser: I don't want to give away too much, I want people to listen on Friday. It's always fun to catch up with Josh. This is the second time we've been able to chat in regard to the company and earnings and strategy and everything that they're doing. I think the enthusiasm behind the opportunities and the enterprise customers, along with their international opportunities is really exciting. They signed the biggest deal in company history, actually, with a global logistics provider. Yes, Mary, I did ask who that provider was, and they just won't tell us yet.

But that was part of the enterprise opportunity. I thought that was very encouraging. Ultimately, one of the things that stood out to me the most just the fact that they raised their total addressable market opportunity rather significantly. They typically do it on a two year cadence, but they did addressed this in the first quarter of this year because of some acquisitions. They raised that total market opportunity from $50 billion to $77 billion. This most recent quarter that they just reported. They raised that total addressable market opportunity now to $129 billion. I asked Josh about what was behind the drivers. I feel like we have to make people listen to the show on Friday to get a little bit more insight as to why that is.

Mary Long: There we go. That's how you do a teaser, Jamo [laughs]. Axon is a big name within the Motley Fool Stock Universe. But there might be some folks listening who are more unfamiliar with the company. Basically, the two second story is that Axon is developing weapons for law enforcement. Their mission, notably, is to make the bullet obsolete. The technology and weapons that they develop is focused on TASERs on VR technology. I mentioned that earnings came out yesterday for the company after the bell. They beat expectations on the top line revenue up 37%. Also on the bottom line. You have gross margin growing by a couple basis points, cash flow up 79%. They also put out strong guidance for the year ahead. You just gave us a little glimpse into your conversation with Josh and hinted at some things to come in the conversation that will air later this week. Anything especially noteworthy from the report itself that you want to call attention to?

Jason Moser: I think you hit on a lot of the great points there just in regard to the growth.. This has just been a very consistent grower, and that's for a lot of reasons. But I thought there were some interesting points to take away from the shareholder letter. They reached a number of milestones this year. This was their 12th consecutive quarter of 25% or better revenue growth. They broke through the two billion dollar in annual revenue barrier. That's really encouraging.

Again, one of the things we love about Axon, there's some certainty there, some reliability in the business model. Annual recurring revenue grew 37% now to one billion dollars. I think those were the numbers that really stood out to me, along with the fact that their net revenue retention rate of 123%. That's just consistently a very good number for them. They always report really consistently well on that. I think that's just indicative of the fact that they're able to not only bring new customers into the fold, but then they do a very good job of growing the relationship with those customers.

Mary Long: Let's dive into that net revenue retention rate a bit, because at 123%, what that effectively means is that the typical Axon customer is spending 23% more with the company now than they were a year ago. How is Axon growing that relationship with its existing customers? What exactly is it that those existing customers are spending more on?

Jason Moser: I've always said, I think that Axon, to me, it's the Apple of public safety. I mean that in every good sense. They do a very good job of building great hardware, and then iterating on that hardware, bringing out new versions of that hardware, and then selling the software and the services that come with managing that hardware and all the data that flows through that stuff. When you talk about it, what are these customers spending more money on? Well, some of these numbers are pretty impressive. But over the course of 2024, they shipped more than 200,000 TASER devices. They shipped more than 300,000 body cameras, along with over 900 million cartridges. Those cartridges are what go to those TASER devices. It's a nice little razor and blade model there that we like so much. Then with the other side of the business beyond the hardware, Axon Cloud and services revenue was up 44%-$806 million.

They continue to invest in the AI opportunity, and I think this is going to be a big part of this company in the coming years. They have this AI Era Plan that ultimately gives their customers access to all of their current AI developments along with the future AI developments that they haven't even yet come up with. But that was, I think, a really encouraging part of the report. They were able to close their first 10 AI Era Plan deals in the fourth quarter of the year. Ultimately, that's just another way that they are able to bring customers into the fold and then keep them by continuing to develop new services in additional insights and benefits from being a part of that Axon family.

Mary Long: That AI Era Plan is interesting to me. In the call Axon outlined five big innovative leaps that they took in 2024, the first of which was artificial intelligence in policing. I understand the use of virtual reality in law enforcement training, but artificial intelligence in policing itself sounds like something different to me. Axon calls this AI driven public safety. What does that exactly look like, and how does that roll up into this AI Era Plan that they've outlined?

Jason Moser: Well, I think that'll be something that we continue to watch develop over the coming years. But again, it go back to this idea of Axon being two businesses. The hardware, along with all of the software and services that they provide their customers in order to take advantage of that hardware. While, yes, a lot of this is based on this AI Era Plan in specific with the AI Era Plan. There's this Draft One service, for example, which is like a transcription service for lack of a better term for officers who need to take the audio and video content that they generate from whatever situations in which they're placed and ultimately produce police reports.

For something like a police report where it would be a 3-4 hour ordeal, putting all of this information together, making sure it was correct, this Draft One service is a great way to be able to take all of that data, produce a police report in just a fraction of the amount of time. The anecdotal evidence is there. Their customers love it. It's saving them hours upon hours of time. Then, furthermore, this is something that's being received very well in the actual court system. You go beyond just what their customers, the police officers or public safety officers may feel. The prosecutors, the litigators in the courtroom are looking at this stuff, saying, you know what? This actually works really well. I think one of the biggest questions in regard to AI today, given we're in such an early stage of development in this technology, is the reliability. When you see prosecutors and litigators getting in and they're in the courtroom, saying, you know what? These police reports are reliable. They work with this draft one product, I think that's super encouraging.

Then the other part of Axon, really, it's all of these cameras and sensors. They're connecting all of this stuff together and learning how to do more with the data. Those AI investments are really paying off there. Then finally, I think the acquisition of Fusus. They acquired this company Fusus back in the early part of 2024. Ultimately, this is just a deployable and automated real time crime center platform. That's something that, again, is taking advantage of all of these connected devices, making sense of the data, and being able to provide real time and actionable insights in a very quick fashion. To me, that just really speaks volumes to the investments that they're making in all of these artificial intelligence concepts.

Mary Long: There are a lot of high hopes baked into Axon's current stock price, and perhaps with good reason, but this is a company that's currently trading at 90 times forward earnings. No matter how you slice it or no matter what metric you look at, you're paying a premium for this company at the moment. How do you figure out what a fair price is for Axon at the moment?

Jason Moser: I think that's a very fair statement that you made there. It does feel like you're always paying a little bit of a premium for a business like this, but that's for good reason. I think part of that is because of the market opportunity that we continue to see here. A company that just crossed over two billion dollars, and now they're seeing somewhere in their neighborhood of a market opportunity of $130 billion. Now, that's not to say they're going to capture all that market, but even just capturing a fraction of that really speaks to the growth potential for a business like this. We go back to those things like the recurring revenue, these installed bases, the hardware that they get out there, and that they continue to iterate on. It's funny. Look at the TASER, for example. It reminds me, again, I go back to Apple. When you think about Apple iPhone 1, 2, 3, 4, and on, TASER is following that same path there.

I think they're on TASER 10 now. But it's not just TASER. It's body cameras and all this other stuff, and so, to me, it makes a lot of sense that the business generates this valuation. Now, I think one of the biggest risks with a company like Axon is valuation. We saw that it really started taking off here. Then, over the last couple of weeks, we saw a really big pullback based on a headline there. That's understandable. I think with Axon, to me, it always struck me, and as a shareholder, this is the way I view it personally. I think it's a great company to focus on buying a little bit here and there when the opportunities present themselves, and building a position in a company like this over the course of time. But it seems like the most prudent strategy to mitigate that valuation risk that I think it's going to exist with this company for many years to come.

Mary Long: Before we move on to the next topic, let's hit on that really big pullback that you just mentioned and the headline that you hinted at. Despite dropping earnings yesterday, Axon was in the news last week. They dropped nearly 30% within three trading days. The reason behind this largely attributed to the fact that Axon cut ties with their former partner, Flock Safety. Flock Safety is an automated license plate reader, and Wall Street analysts started downgrading the stock as a result of the severing of this relationship, the thinking being that Flock Safety might go on to be a competitor of Axon's. What was the nature of Flock's earlier relationship with Axon? How integral were they to the Axon value proposition? How has that relationship changed and how do you think that it will impact the company moving forward?

Jason Moser: I think this is a great example of understanding the difference between the headlines versus reality. Now, this is something I asked Josh in our conversation, and it's also something that he addressed on the Earnings call as well. This headline came out recently about the relationship with Flock Safety, Flock Safety being the tech start-up in the automated license plate reader technology. They've been partners since April 2020, and they worked very well together, and it's something that has worked out very well for both parties involved.

My question ultimately was, is this a sign that Axon is pivoting and going another way where they want to try to grow their own solutions here or is it something where the companies still want to work together, but they just need to ultimately negotiate better terms? It sounds like this is the latter. It sounds like this is something where the two companies still want to work together, but they really need to come to better terms that work out perhaps better for both parties. That's Negotiation 101, everybody's going to have their own perspective on that. I would not be surprised at some point here in the near future, if we saw a headline that said that Axon and Flock Safety are working together again and renegotiated their relationship there. But time will tell there. I think, regardless, if the worst case scenario occurred where the two just parted ways and would never work again, I think that's a net loss for Flock, as opposed to Axon. I think Axon really has a lot of resources at their disposal to be able to build this technology and do what they want to do. But my suspicion is we will see this relationship continue. It does feel like it's a little bit of a negotiating tactic.

Mary Long: We're going to move on to a little bit of a retail round up to close us out for the day. We also got earnings this morning from TJX. That's the parent company behind T.J. Maxx, Marshalls, HomeGoods and more. That company saw fourth quarter sales of $16.35 billion come in just below that of a year ago. Also saw fourth quarter profit stay flat with the year before. Management expects comparable sales for the year ahead to rise ever so slightly. All this might sound lukewarm, but Wall Street is relatively pleased with the news. The stock was up slightly, like about 3% this morning. We're not really expecting gangbusters growth in traditional retail companies, Jamo. But if that's the case, what does success look like in this brick-and-mortar retail business?

Jason Moser: I think these results were OK. It didn't like the world on fire, but given the retail environment today, it's more or less, I think, what we expected. I think with a company like TJX, this is a business that focuses very much on the value side of things for consumer. You look at the brands behind the company, it's T.J. Maxx, Marshalls, HomeGoods.

For them, I think the success really is clearly Number 1, growing that top line. Revenue has grown a little bit better than 6% annualized over the last five years, which I think is encouraging, particularly given their value focus. But more importantly, I think you look at a business like this, net income is up better than 8% over that same course of time. They generated a bit better than four billion dollars in free cash flow just over the last year. There's a lot to be said for focusing on that value consumer and having that broad array of different store concepts really, I think, plays into their advantage, and they really start to exploit that advantage of scale.

Mary Long: Another element of this retail angle is that it's Party City's last week in business. This is a company that was integral to at least my childhood. It's a party supply store. They went through their first bankruptcy restructuring in 2023. They were able to erase about a billion dollars of debt, but still found itself stuck with $800 million of debt. Therefore, this past December, it filed for bankruptcy again. A few franchisees, just under 30 will keep the independent party city locations operating, but for the large part, the business is closing down. This sticks out to me because Coresight Research, which publishes data on retail closures, predicts the US will see approximately 15,000 store closures in 2025 for contacts in 2022. Peak pandemic, Coresight Research tracked 10,000 store closures. They're predicting even more store closures now than we saw during the height of the pandemic.

What do you think is behind this? Is this an e-commerce story, or is there something else eating in person retail?

Jason Moser: I don't think it's just an e Commerce story. I think that's a big part of it, and we see a lot of retail these days, particularly bricks and mortar, where they're very focused on becoming more than just e-commerce, they want to become omnichannel and so being there for their consumers, where and when they want or need. I think another part of this certainly is just given the nature of what something like a Party City sells, for example. This goes back to that old elementary school lesson of wants versus needs. You talk about companies like Party City, for example. That's probably more of stuff that you want but don't necessarily need. You flip that on the other side there and you look at a company like TJX, where they're focusing a little bit more on things that consumers need, and they're absolutely focused on offering value where that could apply. I look at the space when I think of Party City, the other company it reminds me of Oriental Trading company. I don't even know if you know that.

Mary Long: Oh, yeah. Those catalogs are also an integral part of my childhood.

Jason Moser: Oriental Trading company filed for bankruptcy in 2010, and then Berkshire Hathaway bought them in 2012. I think that's one of another example where the e-commerce angle is certainly playing into their favor. But with Party City, they were always so reliant on those big physical footprints. I just don't necessarily think that's the way that consumers thinking about these days. But again, going back to that Omnichannel idea, and I think that's where a lot of retailers are focused these days. It does seem not death by 1,000 cuts, but definitely a few cuts there. Omnichannel, e-commerce, changing consumer behavior wants and needs. That all plays a part in it.

Mary Long: Jason Moser always a pleasure. Always a party. Having you on the show. Thanks so much for being here.

Jason Moser: Thank you.

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Mary Long: Selling sugar and caffeine can be a great business. My colleague Ricky Mulvey caught up with Motley Fool senior analyst Emily Flippen to talk about the fast growing coffee chain Dutch Bros. Its stock is up about 160% over the past year. They break down the business model, the valuation, and the chocolate covered strawberry mocha.

Ricky Mulvey: Emily in preparation for this, yesterday, I did go to a Dutch Bros and it was 9:15 AM on a Monday. I waited in line, and then I made it about one third of the way through a chocolate-covered strawberry mocha to fully appreciate the experience of what they sell. I made it through about a third of that drink before I had to stop, but this is an intensely popular coffee chain that I wanted to dive into you covered the company. Have you been to a Dutch Bros? What was your experience like there?

Emily Flippen: Ironically actually haven't been to a Dutch Bros. They're expanding eastward, so I'm here in Maryland, but I grew up in Texas. When I visited Texas in recently, I planned to visit one, before I realized they didn't even offer brewed coffee, which is actually the only thing I drink. I do think calling this a coffee chain is being somewhat generous with your definition of a coffee chain. But I will just note. They do a really strong business outside of what you would imagine as your typical coffee flavored beverages. They have protein shakes. They have smoothies. They have energy drinks, protein coffee. They do a good job of offering, I guess, a diverse range of products.

Ricky Mulvey: You're not lining up for the sweet cereal sips that could be a cinnamon swirl or one that has marshmallows on the top that promises to taste just like the bottom of a sugar cereal bowl.

Emily Flippen: I guess only if I'm trying to replace my lunch with it.

Ricky Mulvey: Fair enough. This is what's interesting to the investors on this show, and that is, this is a company that is taking off in valuation and in sales. We'll compare this to Starbucks. Dutch Bros launching a lot of new stores as they try to push eastward. During that time, the same shop sales have grown by almost 10% in company operated stores. This is at the same time where Starbucks global North America sales have declined, same store sales at about 4%. What's happening with this disconnect? Why is Dutch Bros taking off while Starbucks is in decline during this Brian Niccol transformation?

Emily Flippen: I think there's a couple of different factors at play. One element of it, I do think is innovation. I think we have slightly a more innovative product line here at Dutch Bros. They've been faster to change their menu to add new products, to take away products that aren't working to drive customers to come and transact at their locations. I think Starbucks has been arguably a little bit more stuck in their ways. They've had a harder time driving those transaction growth. I also think that Dutch Bros has been a little bit more approachable in a more cost conscious environment. I do think it's that push toward innovation as well as just a tighter consumer environment, which driven that disconnect.

But I will say this is a hard environment for coffee chains. It's incredibly competitive, and it's not just Dutch Bros that's popping up around the corner. We see a lot more local coffee shops, as well as alternative beverage shops opening up. I think Starbucks here just has a brand image issue that is showing in their same store sales here, whereas Dutch Bros is the antithesis to that, which is to say, it's cool, it's new, it's trendy, and it has a brand that is rising. Whereas Starbucks is arguably declining.

Ricky Mulvey: I went to Dutch Bros in the morning, and then I drove past Dutch Bros to go to Costco for a tire issue. Big story there. We'll do that another time. It is past 7:00 PM and there is still a line at the drive through for Dutch Bros, maybe getting some of that menu innovation you're talking about, such as the 911, which is six shots of espresso in an Irish cream breve or the double torture, which is an extra double shot espresso, vanilla and chocolate milk. This is the innovation that people are lining up for, and all of that is drive through. This is a 90% drive through business. If you're Dutch Bros, why are you getting rid of that coffee shop experience for people to enjoy your 911 drinks or your double torture beverages?

Emily Flippen: I turned that question on its head. If you're Starbucks, why are you forcing me to walk inside of a store and stand in line just to get my coffee or just to get my beverage? I really do think the demand and the need for the third place, the thing that made Starbucks what it was 20 years ago, just isn't where the market is anymore. I think there's this need for Express. The drive through model is meeting consumers where they are today, and you'll see that through the line and sure that's not it for everybody, but I do think that consumer's willingness, as shown through that amazing, nearly 10% company owned, same stop sales growth, shows that people are at this point in life, more willing to sit in a line from the comfort of their car or do that mobile order pickup as opposed to physically go into a location. In the case of something like Dutch Bros, that saves them on something like a real estate footprint because they don't need to pay for in store seating or a larger square footage.

Ricky Mulvey: This is a stock that has exploded lately, and the valuation is a tricky one. Earnings have 10X over the past year as the company becomes more profitable. However, Emily, when I look at this, this is still a coffee shop where, like, 80-90% of your sales are going to go to your coffee beans, your rent. You got to pay the guy who called me a good man for ordering a medium chocolate covered strawberry mocha rather than a large chocolate covered strawberry mocha. When he asked what I was up to for the rest of the day, I was like, I just got to work. He's like, if you're working, you need a large, not a medium. No, I'm getting a medium. Anyway, that's where all the costs are going. When you're looking at this, you're probably not looking at an exploding margin expansion story. Right or am I wrong?

Emily Flippen: Clearly, money well spent if you ask me what a great employee there, but I do think you're wrong here. This is definitely a margin expansion story. Yes, to your point, there are still store expansion that's necessary here. Part of the thesis here for Dutch Bros is their growing store account 15% plus a year as they expand eastward. You can debate whether or not that's going to be successful, but that's management's guidance. But also margins, this is a barely profitable company. They just got profitable over the last couple of years. Margins are still very much in the world of expanding. If you look at where their GAAP net income margins are today, it's right around 2-3%. If you compare that to any of the other players in this space, they are a fraction at where their competitors are. I do think there is a lot of white space for this business to expand margins.

Long term, I think they have a better margin profile than the Starbucks of the world, than the Chipotles even of the world because they have a smaller footprint, lower overhead costs. They're able to do more with less simply because their model is more efficient. The reason why we're not seeing that come down to earnings yet is because they are still in expansion mode. They're still in growth mode. They're doing stuff like spending money on marketing costs, spending money on CapEx. All of those things are still coming down right now, which is why you're not seeing that flow through the bottom line. I think something like price to earnings is definitely the wrong way to be evaluating this company for where they are today.

Ricky Mulvey: We'll talk about that in a sec because 221 times earnings is a eye popping multiple, but one thing I want to focus on before we get there is the stock issuance, because Dutch Bros does like to issue stock. They say they're not going to do it, but then you got general corporate purposes going on, so maybe you got to issue some stock. Is dilution a concern for long term investors here?

Emily Flippen: I would say yes and no. This has been a historically pretty dilutive business. Again, for where they are in the life cycle of this business, though, this is still very much a growth company. We see this in a way that they're funding their capital expenditures. You have a couple of different options for how you're going to raise money. This is a company that has chosen to do that via public markets, and part of that is coming from their private equity sponsors. Same company same private equity sponsors that I say, took Planet Fitness public.

This is same thing that they're doing here at Dutch Bros. Some of this is selling out the private equity sponsors, that's contributing a bit to that dilution. I'm not overly concerned about it, but I will say this about the dilution in general. This is a company that, as they seek to expand their store account getting from around 1,000 stores today to upwards of 4,000 stores over the course of the next decade. Massive expansion plans. That is incredibly, incredibly capital intensive. They want to do that mainly through company owned stores. They have some franchise owned stores, but they want to do that mainly through their own company owned stores that requires a lot of upfront capital. Now, management has said that they have raised the capital they need and will be self funding from this point forward. They believe that they're not going to be dilutive from this point forward. I'm a little bit more doubtful. I built my model for this company at the midpoint end of last year, and in order to meet a lot of these growth targets, I expect that they're probably going to need to raise capital.

I would expect that they probably do that via debt at some point, as opposed to issuing more shares. I'm not management, though, so what do I know? I'm a little bit doubtful of that. But if you're taking management at their word here, they expect that dilution will slow down. But to your point, this is a company that is still growing, still just becoming profitable. But if they're able to do that and be self funding, then that dilution should slow down or stop altogether.

Ricky Mulvey: You don't want to use price to earnings. Companies over 200 times earnings. What multiples do you want to use here to talk about this company's valuation?

Emily Flippen: It's not that price to earnings is the wrong way to think about it. When you think about a business long term, you're always evaluating, where do I think it's going to be five, even 10 years from now in terms of cash generation. Earnings is one way to evaluate an element of cash for that company operating margins. I just don't think where they are today in terms of their current earnings potential representative of their long term earning potential. I do not think this company is going to be producing 2% net income margins into perpetuity. I think it's probably going to be closer to 15% net income margins into perpetuity. Really what I'm looking for here is how rapidly can they expand and how can they sustain that store account? As they expand eastwards, how do they handle competition?

They have some pretty stiff competition eastward. Not only does real estate get more expensive, but they're competing a bunch of pre existing coffee chains. North easterners are very particular with their coffee, so let's see how they do there. If they're able to achieve double digit store expansion, those 4,000 store account, that's what I'm looking for here. How are they able to do in terms of same store sales growth? We mentioned at the top that they have nearly 10% same store sales growth for company owned stores. However, management has consistently guided for low to mid single digit same store sales growth. That to me says, maybe there's an element of fattiness here. Are they cannibalizing their existing stores? Right now, their expansion plans are through this fortressing strategy, long term. Two years from now, three years from now, did they overbuild their stores? Do they have to start closing down stores that are under performing? In that case, that's showing to me that this is a fattiness. They're not actually able to compete in the areas that they're rapidly expanding into.

Those are the things that I'm using to judge long term performance, not saying, well, where earnings right now. That's not the valuation story for this company, long term. The actual story is. What does a long term margin profile look like? What does a long term growth story look like? There are a lot more factors that go into that beyond just the 2% earnings margin that we see today.

Ricky Mulvey: I did a valuation that you did a really nice one that was very thoughtful and detailed. Mine for those listening was the equivalent of playing, like, TikTok on the back of a napkin. I got one, so let's say Dutch Bros, quadruples revenue, quadruple store account, quadruples revenue and gets a more mature Starbucks type earnings multiple. Right now, this stock would be considered cheap. But let's say Dutch Bros it doesn't quite go as they expect. They double their revenue. They keep issuing some stock, and you still have a 50X earnings multiple, which is a little growthy, especially compared to Starbucks. If that happens, investors are even. As you're watching this company's growth story moving forward, what are the scenarios you're thinking about? Is it these? Is it something else?

Emily Flippen: Something else entirely because when somebody is slapping an earnings multiple onto a company, what you're implicitly doing is taking in the market's assumption for something like operating margin. What is your operating margin assumption, in that case?

Ricky Mulvey: I did about 10%. We turn out at about 10%.

Emily Flippen: That's an assumption that I think is critical when judging this type of company's success. There's two different ways that this company goes about building out their store location. There's a ground leasing model, and that ends up being slightly more capital-intensive in the long term versus in the near term. There's lots of different ways that you can go about building out 3,000 plus locations that can end up having an impact on what the long-term margin profile for this company looks like. I always hesitate against making broad-reaching assumptions about something like an earnings multiple because the implicit assumptions that go into that can end up making errant assumptions about the valuation of a company. In my case, what I'm looking for, and again, this is a lot easier to make the math work for business like Dutch Bros when I did this math again earlier last year versus today.

I'm not trying to argue that the company is screaming by today. I can still make the math work. It's a lot harder. I will argue that. You need that 15% plus store count over the course of the next decade. That's a lot. That's one of the biggest factors here. You need same store sales growth around 5-6%. A lot of that is coming from pure transaction growth. The royalty members, the roll out of stuff like mobile ordering, you need a lot of people coming back, ordering more at higher prices. Same-store sales growth above what management is guiding for today, as well as a net income margin gap, non-adjusted net income margins, 15-20%. I think if you can make those assumptions work, then you're looking at a market beating investment here. That's with my discount rate of around 8-9%.

Ricky Mulvey: Hopefully, that's not too in the weeds. I really enjoyed the discussion. Emily Flippen, thanks for being here. Appreciate your time and your insight.

Emily Flippen: Thanks for having me. Everyone, go grab a coffee.

Mary Long: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Mary Long. Thanks for listening. We'll see you tomorrow.

Dan Boyd has positions in Berkshire Hathaway. Emily Flippen, CFA has positions in Axon Enterprise. Jason Moser has positions in Apple, Axon Enterprise, and Starbucks. Mary Long has no position in any of the stocks mentioned. Ricky Mulvey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Axon Enterprise, Berkshire Hathaway, Planet Fitness, Starbucks, and TJX Companies. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.