Market Participants Recognise Dutch Bros Inc.'s (NYSE:BROS) Revenues

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 1.3x, Dutch Bros Inc. (NYSE:BROS) looks to be giving off some sell signals with its 2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Dutch Bros

What Does Dutch Bros' Recent Performance Look Like?

Dutch Bros' revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Dutch Bros will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Dutch Bros' is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 35% gain to the company's top line. The latest three year period has also seen an excellent 179% overall rise in revenue, aided by its short-term performance. 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 22% per year as estimated by the twelve analysts watching the company. With the industry only predicted to deliver 13% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Dutch Bros' P/S sits above the majority of other companies. 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?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Dutch Bros you should know about.

If these risks are making you reconsider your opinion on Dutch Bros, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.