Investors Appear Satisfied With Dutch Bros Inc.'s (NYSE:BROS) Prospects As Shares Rocket 26%

Despite an already strong run, Dutch Bros Inc. (NYSE:BROS) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 165% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, you could be forgiven for thinking Dutch Bros is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6.9x, considering almost half the companies in the United States' Hospitality industry have P/S ratios below 1.7x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Dutch Bros

How Dutch Bros Has Been Performing

With revenue growth that's superior to most other companies of late, Dutch Bros has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Dutch Bros' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Dutch Bros?

Dutch Bros' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. The strong recent performance means it was also able to grow revenue by 157% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 21% each year as estimated by the eleven analysts watching the company. With the industry only predicted to deliver 13% each 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. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

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

Dutch Bros' P/S has grown nicely over the last month thanks to a handy boost in the share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

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 these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Dutch Bros with six simple checks will allow you to discover any risks that could be an issue.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.