Best Coffee Stock to Buy Right Now: Starbucks vs Dutch Bros

There are plenty of coffee stocks on the market these days, but most of them are diverse food giants or very small upstarts. Starbucks (SBUX 0.17%) and Dutch Bros (BROS 0.37%) stand out as the largest and most popular pure-play coffee experts.

The two coffee chains may look similar at a glance, but they also have deeply rooted differences. Let’s see which one might be a better cup of Java for your personal stock portfolio.

Common qualities and unique quirks

These coffee chains might have more in common than you thought. Sure, Starbucks is larger and older after launching its first Seattle coffee shop in 1971. But Dutch Bros is no spring chicken, either. Founded in Oregon in 1992, the smaller chain has 32 years of operating history.

So it’s not a fresh-faced upstart. Dutch Bros just happens to be unfamiliar to those of us who don’t spend much time in its core markets on the West Coast. I used to have two Starbucks locations in comfortable walking distance from where I sit (and you could sit in one location and see the other), but the closest Dutch Bros is a 90-minute drive away. And that location is just 6 months old.

Starbucks is defending a nationwide store network with nearly 39,500 locations and a global footprint. Dutch Bros is in a heavy expansion phase with just 912 restaurants in 18 states. Maybe I’ll have several Dutch Bros within a stone’s throw from this desk someday, but that’s not the situation quite yet. Starbucks grew its location count by 6% over the last year while Dutch Bros boosted its store network by 21%.

They also run their stores differently. Starbucks is happy to take your orders online, at the cash register, or by the drive-through window. Dutch Bros is all about the drive-through experience, where high-energy “broistas” often tackle very long lines with a smile. There’s an app and you can order ahead, but there’s just one place to grab your caffeinated drinks.

Which coffee stock should you order?

Starbucks is going through some internal turmoil right now. The company recently brought in former Chipotle Mexican Grill (CMG) and Taco Bell (YUM -0.09%) chief Brian Niccol to run the show. Niccol is a proven master of turnarounds, hoping to light a new fire under the company’s stalled growth trends.

If you’re into turnaround stories, Starbucks is worth a closer look. The stock has been volatile and not very rewarding in recent years, but Niccol might find a better way forward.

But if you’re looking for high-octane growth and a fresh spin on the common coffee shop idea, Dutch Bros could be right up your alley. Trailing sales have soared 150% higher in two years and the company is profitable nowadays. That’s a rare combination in the high-growth corner of the restaurant industry, where companies often run with negative bottom lines while building as many new locations as possible.

Furthermore, Dutch Bros has more cash than long-term debt on its balance sheet. Starbucks has a more traditional financial statement with #3.4 billion of cash equivalents and $15.6 billion in long-term debt papers.

Dutch Bros isn’t every investor’s cup of Joe, but you might like it

All told, Dutch Bros offers a rare combo of shareholder-friendly features. The company is growing like wildfire, collecting robust bottom-line earnings, and equipped with a rock-solid financial platform.

The stock isn’t cheap, of course. Dutch Bros shares have gained 39% over the last year while Starbucks only rose by 4%. it trades at 141 times trailing earnings, far above the larger coffee chain’s 27.

But that’s just how it goes with exciting growth stocks. They are valued by their potential for long-term growth, not by their proven profits. If you’re comfortable assuming that Dutch Bros will continue its soaring growth for many years, this could be the best coffee stock to buy today.