Worried about the market? This stock should do well in almost any market environment

The difficult start to September may conjure up memories of 2008 and other challenging years, when the September selloff brought a historic bear market. This doesn’t mean 2024 is 2008 all over again, but such concerns may prompt investors to either sell stocks or at least avoid buying over the next few weeks.

Such concern can lead investors to look for stocks that can lead to business growth and rapid growth under almost any circumstance. Given its growth trends, investors may want to take note Dutch Bros (BROS 0.13%) stock. Here’s why.

Market position of Dutch Bros

Amid economic uncertainty, Dutch Bros is in a unique and strong position. In one sense, coffee is a highly competitive business. Even if consumers choose not to make coffee at home, they can go to Starbuckscompeting chains like Dunkin’ or one of the many independent coffee shops that dot the US consumer landscape.

Fortunately for Dutch Bros, it has found a way to stand out with its unique variety of drinks. It is probably best known for its Dutch classics, which are drinks based on a combination of espresso and half and half. For those who don’t want coffee, they also offer teas, smoothies, energy drinks and other beverages.

In addition, consumers like to have coffee and other beverages in almost any economic environment. This can also be true in a recession, as cash-strapped customers may go out for a Dutch classic or a smoothie when a nice dinner might not fit the family budget.

In addition, Dutch Bros is in the midst of a rapid expansion from regional to national, a trend that once led actions such as Home Depot, Walmartor the most important coffee stock, Starbucks.

Dutch Bros operates more than 900 locations in 18 states and, with a goal of reaching 4,000 stores, has a long growth trajectory. This is in contrast to Starbucks, whose more than 16,700 locations in the US alone almost saturate the largest market.

Dutch brothers by the numbers

The company’s financial statements highlight this advantage. In the second quarter of 2024, total revenue rose 30% from year-ago levels to $325 million. About four percentage points of that growth came from an increase in comparable store sales, with the remainder driven by the 158 locations added over the past 12 months.

Moreover, it has been profitable in recent quarters. In Q2, net income attributable to Dutch Bros totaled $12 million, up from $2.8 million in Q2 2023.

Looking ahead, the company is forecasting revenue of just over $1.22 billion (mid) for 2024. If this prediction holds true, it will amount to 27% annual growth. While this is a modest reduction from the T2 number, it is still a robust growth rate. The so-called “slowdown” has led to a post-earnings sell-off and gains of less than 10% for Dutch Bros shares over the past 12 months.

However, this could be an excellent time to add shares. While the stock’s price-to-earnings (P/E) ratio of 127 is well above Starbucks at 26, this may reflect its recent profitability rather than a high valuation. The price-to-sales (P/S) ratio of 2.3 might be a more representative measure, one that makes it less expensive than Starbucks at 2.9 times sales.

Consider Dutch Bros

Investors looking for stocks for an uncertain environment should consider Dutch Bros. The fact that it offers low-cost indulgence should appeal to customers in almost any economic environment. Also, more importantly, Dutch Bros is in the midst of a regional to national expansion, a move that once served some of the best-known retail businesses. As the company expands into more areas, it can likely maintain a double-digit revenue growth rate for years to come.