Investing in growing companies can help you achieve your financial dreams. But it is important to choose actions wisely and maintain a long-term mindset. As long as the companies you own shares of show long-term profitable growth, the stock will take care of itself.
There are great opportunities as we close the page on 2024 and look ahead to a new year. Here are two fast-growing companies serving the restaurant industry that have a long path to growth ahead.
1. Dutch Bros
Those who were lucky enough to invest Starbucks o Chipotle in the early stages of their growth they will be sitting on a good income by now. Identifying emerging restaurant growth stocks can be a very rewarding strategy, and Dutch Bros (BROS 3.33%) could be next.
The stock recently broke out of a two-year slump as it continues to report robust revenue growth. In the last quarter, the top line grew by 28% year on year. It can maintain strong growth for several years as it operates a relatively small store footprint of less than 1,000 stores in 18 states.
“We are making major investments in our development and construction teams and our 2025 pipeline is strong, positioning us to accelerate the growth of the new store,” said CEO Christine Barone.
The management is targeting more than 4,000 shops in the long run. What is important is that Dutch Bros is not aggressive in pursuing growth, which can put a smaller restaurant business in financial trouble. Dutch Bros opens more locations as it reports a profit. Its adjusted net income improved from $22 million in Q3 2023 to $27 million in Q3 2024.
Dutch Bros has successfully expanded its menu over the years from coffee to other specialty drinks like smoothies, which is a sign that the brand is resonating. The company continues to invest in efficient service and customization that should win more customers as it expands in the United States
Analysts expect the company to grow earnings at an annualized rate of 35% in the coming years, which could spell the potential return of wealth for shareholders in the long term. Start with a small investment and average dollar cost over time should work well with this restaurant growth.
2. Toast
Toast (TOAST 4.59%) is a leading software provider for a growing number of restaurants. It’s like Shopify but tailored specifically for the complex needs of an industry. The stock has risen higher in recent months, but the company’s business performance and opportunities ahead could send the stock to new highs in 2025 and beyond.
The action rebounded in 2022 along with the broader market, but Toast’s intuitive and easy onboarding process continues to win over thousands of restaurant operators, which is why the stock is climbing again. In Q3, it added 7,000 net locations, increasing its total to 127,000 – a year-over-year increase of 28%.
“With the disciplined investments we are making to further differentiate our platform and expand into new verticals and geographies, our vision is to serve multiples of that number over time, offering sustainable and efficient long-term growth,” said the CEO Aman Narang.
After operating at a loss for the past few years, the company’s margins are starting to show a significant improvement. The company turned its annual loss into a profit of $56 million in Q3. Management has implemented new pricing adjustments, which are expected to drive further revenue growth and help expand long-term margins.
The stock is expensive relative to competing restaurant software providers. However, Toast’s price-to-sales ratio of 4.8 is favorable if it continues to see double-digit revenue growth and increase margins. The recent jump in shares reflects recent improvements in profitability and where the company is headed.
With an addressable market that is multiples of its annual recurring revenue, Toast stock could provide monster returns to long-term investors.