1 Growth Stock Down 35% to Buy Right Now

Growth stocks have been helping lead the market higher this year, but not all are trading at near all-time highs. This is particularly true in the consumer space, where investors appear to be nervous about the state of the consumer and the economy.

However, while some segments of the consumer appear to be under pressure, the long-term outlook remains solid. One stock in particular, which is down around 35%, has been performing well operationally and has a long runway of growth still in front of it.

That's why I think now is a good time to buy Dutch Bros (NYSE: BROS).

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Strong runway of growth ahead

For those unfamiliar with Dutch Bros, the company is a regional coffee shop operator that has been expanding nationally. It's known for its sweet over-the-top drink concoctions and proprietary Rebel energy drinks. It operates small shops that typically have no indoor seating areas and serve their customers through two drive-through lanes and a walk-up pick-up window.

Its drinks have been a hit with consumers, which can be seen in its strong same-store sales results. The company has consistently delivered mid-single-digit comparable store sales, including a 5.7% increase in the third quarter. Company-owned stores performed even better, up 7.4%, as transactions increased 6.8%.

The growth is being driven by new drink introductions, as well as order-ahead mobile ordering.

Meanwhile, the company has a big opportunity to boost same-store sales in the years ahead with the introduction of hot food items. Stores that have already begun to offer the new food items have seen about a 4% lift in sales. Given that the company has admitted that it has missed out on sales by not having breakfast items, this should be a nice growth driver.

Above all else, though, Dutch Bros is an expansion story. It currently operates fewer than 1,100 shops in 24 states. Most are in the western U.S., but it has been expanding east. Texas and California are its two largest states, each with more than 200 locations, while its home state of Oregon has more than 150 shops. However, that's generally a fraction of the number of stores Starbucks (NASDAQ: SBUX) has in those states, including more than 3,100 in California and nearly 1,500 in Texas.

Dutch Bros currently plans to reach 2,029 stores in 2029, with a long-term goal of 7,000 stores. However, with Starbucks supporting more than 17,000 locations in the U.S. alone, the opportunity could eventually be even bigger. And that's not counting the possibility of eventually expanding into some international markets, as well.

This year, Dutch Bros plans to add at least 160 new stores, which is about 16% growth. Next year, it's looking to add around 175, which would be about a 15% increase in store count. While the company is about 30% franchised, most of the new stores are company-owned.

The great thing about the Dutch Bros model is that, because it has smaller stores, it is relatively cheap to build them out. The company is also able to fund its buildout through the strong operating cash flow it generates, and the company is overall free-cash-flow-positive. While it's growing its store base quickly, it's doing so at a measured pace and within its means. Oftentimes, when restaurant expansion stories fail, it is because they try to grow too quickly, sometimes taking on a lot of debt to do it. This is not the case with Dutch Bros, which even paused its buildout at one point to rework its real estate strategy and focus on the locations where it was seeing the most success.

From a valuation standpoint, Dutch Bros trades at a price-to-sales (P/S) ratio of around 3.5 times 2026 analyst estimates. It has not been uncommon for Starbucks to trade at well over 4 times trailing sales in the past, so given the huge opportunity in front of it, this is a more-than-reasonable valuation. I recommend buying this stock on this dip.

Geoffrey Seiler has positions in Dutch Bros. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.