With the market in a correction, growth stocks continue to struggle. But impressive sales growth has coffee chain Dutch Bros percolating as we wait for the stock market indexes to turn around. After launching its IPO in September 2021, BROS stock looks to serve up a new base as it tests a key moving average.
While Dutch Bros did not make the latest list of new buys by the best mutual funds, 26 funds with an A+ rating from IBD own shares in BROS stock. In other signs of institutional demand, the stock has posted two quarters of rising fund ownership and earns a B- Accumulation/Distribution Rating.
As one of the leading IPOs to keep an eye on, Dutch Bros has earned a spot on the IBD Leaderboard watchlist.
Dutch Bros Percolating Big Sales Growth
Founded in Grants Pass, Ore. in 1992 by brothers Dane and Travis Boersma, Dutch Bros operates and franchises drive-thru shops offering quality coffee and handcrafted drinks.
Launched with one double-head espresso machine, as of the end of last year Dutch Bros had 538 locations across 12 states. The company has nearly an even split between company-owned shops (271) and franchised locations (267).
Over the last three years, Dutch Bros has posted average annual sales growth of 45%. Earnings growth during the same period has averaged 65%.
While revenue gains have remained strong and steady, EPS growth has slowed in recent quarters, After quarterly gains of 900%, 400% and 75% in Q1 to Q3 2021, earnings slipped 50% when it reported Q4 2021 results on March 1.
Dutch Bros has not yet announced a date for its Q1 2022 report. Analysts currently estimate 10% EPS growth for this year.
BROS Stock Looks To Craft New Setup
As many IPOs often do, Dutch Bros jumped out to a nice gain after going public, then quickly retreated. BROS stock is now testing resistance at its 50-day moving average.
Dutch Bros broke down following a breakout from a 62.10 buy point in its IPO base. Now with the market in a correction and BROS stock trying to brew a new chart pattern, it's best to keep your cacao powder dry and for a proper buy point to set up.
But as sales growth remains strong and more travelers hit the road — and drive-through coffee chains — Dutch Bros stands to benefit and expand.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
