Two Outstanding Growth Companies to Acquire Immediately and Maintain for an Extended Period
Two Outstanding Growth Companies to Acquire Immediately and Maintain for an Extended Period
Dabbling in burgeoning businesses can help you realize your monetary objectives. However, it's crucial to select shares prudently and adopt a long-term approach. As long as the companies whose shares you own exhibit consistent growth over a prolonged period, their stock will thrive on its own.
As we bid adieu to 2024 and embrace a new year, two thriving enterprises that cater to the restaurant sector present promising prospects. They are well-positioned for sustained growth.
1. Dutch Bros
Individuals who invested in the initial stages of Starbucks or Chipotle are now savoring sizeable returns. Identifying budding restaurant growth stocks can be a lucrative strategy, and Dutch Bros (BROS -0.32%) could be the next promising pick.
The stock has emerged from a two-year lull, thanks to its persistent revenue growth figures. In the latest quarter, revenue climbed by 28% year-on-year. Its modest store network, comprising less than 1,000 outlets across 18 states, allows it to sustain growth for several years.
Management is investing heavily in infrastructure and team development, and their 2025 expansion plans are robust. CEO Christine Barone stated, "We are expanding our shop growth..."
The company aims to have more than 4,000 outlets in the long run. Dutch Bros isn't reckless in its pursuit of growth, avoiding financial pitfalls that smaller restaurant businesses might fall into. Dutch Bros is expanding while reporting profits. In Q3 2024, net income improved from $22 million to $27 million.
Dutch Bros has successfully diversified its menu from coffee to drinks like smoothies, demonstrating its appeal. The company is focusing on efficient service and personalization, attracting more customers as it spreads across the US.
Analysts project annualized earnings growth of 35% for the company, signaling substantial return potential for long-term shareholders. Starting with a modest investment and systematically increasing it via dollar-cost averaging could yield benefits with this growth-oriented restaurant stock.
2. Toast
Toast (TOST -1.17%) is a prominent software provider for the restaurant sector. It's similar to Shopify, but catering to the unique needs of this particular industry. The stock has experienced a surge in recent months, but its business prospects and future possibilities suggest further price increases in 2025 and beyond.
The stock plummeted in 2022, along with the broader market, but Toast's user-friendly onboarding process continues to impress thousands of restaurant operators, hence the stock's resurgence. In Q3, it added 7,000 new locations, bringing its total to 127,000 – a year-on-year increase of 28%.
CEO Aman Narang ascertained, "By investing cautiously to distinguish our platform and branch into new sectors and locations, our vision is to serve a larger number over time, ensuring steady, efficient growth in the long term."
After posting losses for some time, the company's profitability has significantly improved. In Q3, it reported a profit of $56 million, surpassing its year-ago loss. Management has implemented new pricing strategies, aiming to bolster revenue growth and fortify margins over the long term.
The stock appears costly compared to rivaling restaurant software providers. However, its price-to-sales ratio of 4.8 is justified if it continues to generate high double-digit revenue growth and improve margins. The stock's recent gains reflect its enhanced profitability and future direction.
A market with potential larger than its annualized recurring revenue could generate staggering returns for long-term Toast investors.
- Given the success of companies like Starbucks and Chipotle in the past, investing in promising restaurant growth stocks like Dutch Bros could potentially yield significant returns. With its robust expansion plans, consistent growth, and focus on profitability, Dutch Bros is a strong contender for long-term investment in the finance and investing sectors.
- Toast, a software provider for the restaurant sector, has shown promising growth with the addition of 7,000 new locations in Q3. Despite its high price-to-sales ratio, the company's enhanced profitability, improved margins, and potential for high double-digit revenue growth make it an attractive option for investors looking to invest in the finance and tech sectors.