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Thanks to a pair of recent earnings reports, investors have fresh data they can use to judge Starbucks (NASDAQ: SBUX) and Dutch Bros (NYSE: BROS) businesses right now. Both stocks rose in the wake of these announcements, but the coffee chains are still trailing the wider market this year. Dutch Bros is in slightly negative territory, in fact, and Starbucks is up just 5% compared to a 14% increase in the S&P 500 in 2023.

The beverage sellers are in much different places in their growth journeys, and so their stocks will likely appeal to different types of investors. With that in mind, let’s look at which one would be a better fit in your portfolio right now.

Finding growth

Both companies reported solid third-quarter growth, but the sales gains are coming from different places. As you might expect, Dutch Bros is expanding revenue mainly through its store expansion. The chain opened 39 locations last quarter and entered two new states, Alabama and Kentucky.

Its store base has expanded to nearly 800 this year compared to 641 a year ago. Combined with a 4% increase in same-store sales, that expansion allowed overall revenue to rise 33% to $265 million.

Starbucks already has 18,000 locations in the U.S. alone, and so its rate of expansion is smaller since it is coming off a huge base. Yet its overall performance will impress more growth investors.

Same-store sales were up 8% last quarter, or double the rate of Dutch Bros. Better yet, customer traffic growth accelerated to a 2% increase from 1% in the prior quarter. Add in a modest uptick in the store footprint and you get an 11% total sales increase to $9.4 billion. Not bad at all for an industry leader.

Cash and profits

Starbucks offers more for investors seeking strong finances as well. Operating cash flow is ample and has jumped in 2023 compared to last year.

Compare that to Dutch Bros, which recently had to issue more stock and increase its credit facility to add more financial flexibility. The company is still cash-flow positive, sure, but these moves demonstrate that it can’t yet fully fund its aggressive growth strategy solely through internal cash flow.

Starbucks’ profitability reflects its dominant market share and is sitting at a rate that Dutch Bros can only hope to approach in the far-off future. Operating profit landed at 18% of sales this past quarter compared to its smaller peer’s 3% rate. Starbucks is also boosting that metric quickly with help from cost cuts and popular new product releases.

Picking winners

It should come as no surprise that you’ll have to pay up for Starbucks compared to its less established peer. Shares are valued at 3.3 times sales while Dutch Bros is available at below 2 times revenue. That’s a bigger valuation gap than it seems since Dutch Bros is growing sales at a much faster rate here in its early expansion phases.

But most investors will prefer Starbucks stock today. The café giant provides a good opportunity for double-digit sales growth and even faster earnings gains as margins expand into 2024. It is a far less risky growth stock as well, thanks to factors like its huge global sales base, ample cash holdings, and diverse global revenue streams.

Toss in a steadily growing dividend, and there are plenty of good reasons to consider owning Starbucks over Dutch Bros right now.

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Demitri Kalogeropoulos has positions in Starbucks. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.

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