Dutch Bros Inc. (NYSE:BROS) Not Flying Under The Radar

When you see that almost half of the companies in the Hospitality industry in the United States have price-to-sales ratios (or "P/S") below 1.4x, Dutch Bros Inc. (NYSE:BROS) looks to be giving off some sell signals with its 3.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for Dutch Bros

What Does Dutch Bros' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Dutch Bros has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dutch Bros.

How Is Dutch Bros' Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Dutch Bros' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. The strong recent performance means it was also able to grow revenue by 177% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 21% each year over the next three years. With the industry only predicted to deliver 11% per year, the company is positioned for a stronger revenue result.

With this information, we can see why Dutch Bros is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Dutch Bros' P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Dutch Bros shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about this 1 warning sign we've spotted with Dutch Bros.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.