BROS

We rate Dutch Bros Inc. (BROS) as Avoid with a composite score of 34.5/100 at a current price of $49.19. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in value (34th percentile) and quality (33th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (23th percentile) and momentum (23th percentile) tempers our overall conviction. We assign a Narrow Moat rating (48/100), High uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Dutch Bros Inc. holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 34.5/100 places it at rank #4162 in our full 7,333-stock universe. At $8.6B in market capitalization, Dutch Bros Inc. is a mid-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 30%, though momentum at the 23th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 27% (-9.7pp vs sector) narrow to operating margins of 10% (+6.4pp vs sector) and net margins of 7.1%, yielding a gross-to-net conversion rate of 27%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $49.19, Dutch Bros Inc. is trading at a premium to fundamental value. Our value factor score of 34/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 56.5x (a 163% premium to the sector median of 21.4x), EV/EBITDA of 40.1x (at a premium), P/B of 6.9x, P/S of 4.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to Dutch Bros Inc.. Key risk factors include elevated market sensitivity (beta of 1.60), below-average price stability (33th percentile), weak quality scores (33th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.60); below-average price stability (33th percentile); weak quality scores (33th percentile); elevated valuation multiple (P/E 56.5x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 33th percentile and quality factor at the 33th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (23% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Dutch Bros Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 12.2%, and the balance sheet is managed within acceptable parameters (D/E: 23%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Dutch Bros Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Dutch Bros Inc. receives a Avoid rating with a composite score of 34.5/100 (rank #4162 of 7,333). Our quantitative framework assigns a Narrow Moat (48/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 29/100.

Our analysis does not support a constructive view on Dutch Bros Inc. at this time. The combination of the current quantitative profile, high uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.