Value
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 0.0 |
| P/S | 5.6 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 2.1 |
| PEG | 4.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 54.3x
- ▸PEG: 2.46
BROS · Why this verdict
Why Dutch Bros (BROS) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Dutch Bros operates a high-growth concept with four consecutive earnings beats and 31% year-over-year revenue expansion, but free cash flow converting at only 49% of net income, a forward multiple of 53 times earnings, and 44% short interest combine to make the current setup unfavorable for new capital at these levels.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue is growing at 31% year-over-year, placing the company among the top growth operators in its industry peer group—a trajectory that, if sustained, would provide the foundation for eventual valuation normalization. Growth breakdown | Revenue growth remains above 20% year-over-year for at least two consecutive quarters over the next 12 months. | →Stable |
| CounterAt a forward price-to-earnings ratio of 53.3 times and a PEG ratio of 2.61, the valuation already extrapolates a long runway of elevated growth; any deceleration toward industry-average rates would trigger a sharp multiple contraction. | ||
At a forward price-to-earnings ratio of 53.3 times and a PEG ratio of 2.61, the shares screen as expensive, with the current target implying only 3.7% price headroom from current levels—leaving no margin of safety for any execution shortfall. Valuation breakdown | For valuation to reach a more reasonable level, the forward multiple would need to compress below 35 times, which requires earnings growth to outpace the current price appreciation. | →Stable |
| CounterHigh-growth category leaders can sustain premium multiples for extended periods if unit economics improve and revenue continues to compound; the valuation may be rational if the growth runway extends further than consensus currently prices. | ||
Free cash flow is converting at approximately 49 cents for every dollar of net income, meaning reported earnings are running materially ahead of cash actually being generated—a level the data explicitly flags as a quality concern. Quality breakdown | Free cash flow as a percentage of net income rising above 80% over the next two fiscal years would resolve the quality concern. | →Stable |
| CounterCash conversion lag can be transitory during periods of heavy growth investment; if the gap closes as the business matures, the quality penalty in today's assessment may prove premature. | ||
A short interest level of 44% of the float introduces significant headline risk in both directions—a strong earnings beat can ignite a sharp covering rally, while any operational stumble amplifies the downside with forced-seller dynamics. Risk breakdown | Short interest declining below 20% of the float would signal that the bearish thesis is losing adherents and the risk overhang is easing. | ↓Deteriorating |
| CounterElevated short interest that persists over multiple quarters typically reflects genuine concerns about valuation or business quality; the collective market skepticism may prove correct, particularly given the combination of expensive multiples and below-par cash conversion. | ||
Revenue is growing at 31% year-over-year, placing the company among the top growth operators in its industry peer group—a trajectory that, if sustained, would provide the foundation for eventual valuation normalization.
→StableGrowth breakdown
- Expectation
- Revenue growth remains above 20% year-over-year for at least two consecutive quarters over the next 12 months.
CounterAt a forward price-to-earnings ratio of 53.3 times and a PEG ratio of 2.61, the valuation already extrapolates a long runway of elevated growth; any deceleration toward industry-average rates would trigger a sharp multiple contraction.
At a forward price-to-earnings ratio of 53.3 times and a PEG ratio of 2.61, the shares screen as expensive, with the current target implying only 3.7% price headroom from current levels—leaving no margin of safety for any execution shortfall.
→StableValuation breakdown
- Expectation
- For valuation to reach a more reasonable level, the forward multiple would need to compress below 35 times, which requires earnings growth to outpace the current price appreciation.
CounterHigh-growth category leaders can sustain premium multiples for extended periods if unit economics improve and revenue continues to compound; the valuation may be rational if the growth runway extends further than consensus currently prices.
Free cash flow is converting at approximately 49 cents for every dollar of net income, meaning reported earnings are running materially ahead of cash actually being generated—a level the data explicitly flags as a quality concern.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income rising above 80% over the next two fiscal years would resolve the quality concern.
CounterCash conversion lag can be transitory during periods of heavy growth investment; if the gap closes as the business matures, the quality penalty in today's assessment may prove premature.
A short interest level of 44% of the float introduces significant headline risk in both directions—a strong earnings beat can ignite a sharp covering rally, while any operational stumble amplifies the downside with forced-seller dynamics.
↓DeterioratingRisk breakdown
- Expectation
- Short interest declining below 20% of the float would signal that the bearish thesis is losing adherents and the risk overhang is easing.
CounterElevated short interest that persists over multiple quarters typically reflects genuine concerns about valuation or business quality; the collective market skepticism may prove correct, particularly given the combination of expensive multiples and below-par cash conversion.
Per-dimension breakdown
Quality
3.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.6 |
| ROA | 2.5 |
| Gross margin | 1.1 |
| Op margin | 3.1 |
| Net margin | 2.3 |
| Current ratio | 5.0 |
| FCF quality | 3.9 |
| Moat | 5.4 |
| Piotroski F | 4.4 |
- ▸Earnings quality RED FLAG: 49% FCF/NI
- ▸No competitive moat
Growth
6.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 2.0 |
- ▸Strong growth: 31% YoY
Momentum
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 7.7 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 2.0 |
- ▸Uptrend pullback (RSI 38) - buy opportunity
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 3.2 |
| Analyst rating | 9.0 |
| Price target | 7.7 |
- ▸LLM news sentiment: -0.35 (n=5)
- ▸Analyst upside: 20%
Insider
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| materiality | 2.0 |
| insider conviction | 2.2 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Heavy insider selling — $359,231,535 (3.008% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 0.3 |
| quality rank | 5.0 |
| growth rank | 9.4 |
- ▸Industry growth leader
Technical
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.3 |
| support resistance | 6.7 |
| 52w position | 7.7 |
| gap | 5.0 |
Risk (lower is worse)
2.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 0.0 |
| days to cover | 6.8 |
| volatility | 0.5 |
| put call | 0.0 |
| implied vol | 1.8 |
| beta | 2.3 |
| debt equity | 4.5 |
| news risk | 3.0 |
- ▸High short interest: 35%
- ▸Elevated put/call: 3.30
- ▸High IV: 69%
Catalyst
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCK:QUALITY_FLOORPassed (5)
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:16d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:3.3<4.5
- ASYMMETRY:0.8<1.5@spot
- INSIDER:3.01%=EXTREME
Warning (0)
none
Reward-to-Risk
0.85
Upside
+8.1%
Downside
9.6%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeCatalyst-Driven — Earnings in 16d with 4/4 beat streak
SuitabilityAggressive — Beta 2.32>1.3
Investment implication
The SELL_IF_HOLDING verdict reflects the MOMENTUM gate's 3.3<4.5 outcome against Catalyst at 7.6 and asymmetric R:R of 0.85.
The strongest dimensions are Catalyst at 7.6, Sentiment at 6.7, and Technical at 6.4; the weakest are Risk (lower is worse) at 2.4, Value at 3.2, and Momentum at 3.3. The V9 engine flagged 3 failed gates, producing an asymmetric reward-to-risk of 0.85 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Rapid Revenue Expansion
Trip ifRevenue growth falls below 15% year-over-year for 2 consecutive quarters.
- P2Stretched Valuation Minimal Upside
Trip ifForward P/E multiple compresses below 35 times on current consensus estimates.
- P3Weak Cash Conversion Quality Concern
Trip ifFree cash flow as a percentage of net income rises above 80% for 2 consecutive quarters.
- P4High Short Interest Headline Risk
Trip ifShort interest falls below 20% of the float for 2 consecutive months.