A Once-in-a-Generation Opportunity: 1 Super Growth Stock Down 59% to Buy and Hold Forever @themotleyfool #stocks $BROS $SBUX $CMG $CELH $CAVA

Home to 912 hand-crafted, quick-service beverage shops across the western and southern portions of the United States, Dutch Bros (BROS 5.31%) has quietly become one of the more exciting growth stocks on the market.

Despite nearly doubling its store count since 2021, when the company debuted on the public markets, its share price has declined roughly 59% from its all-time highs. Furthermore, Dutch Bros has quickly established itself as a cash-generating powerhouse, sporting a 17% cash-from-operations margin.

This combination of store count expansion, strong cash generation, and declining share price makes Dutch Bros one of my favorite growth stocks today and a potential once-in-a-generation investment. Best yet, with management aiming to quadruple the coffee, energy drink, and smoothie chain’s store count over the next 10 to 15 years, this growth story could still be in its first few chapters.

Why Dutch Bros’ growing cash from operations is so important

Focused on its three core values of quality, speed, and service, Dutch Bros is tailor-made to run as efficiently as possible. This efficiency plays a prominent role in helping the company generate the impressive 17% cash from operations (CFO) margins mentioned earlier. In simplest terms, CFO is the actual cash the company generates from its day-to-day operations before it spends anything on capital expenditures for store upkeep or new store openings.

I hone in on this specific metric for Dutch Bros because I believe it gives us the best shot at adequately valuing the company compared to its peers through a price-to-CFO (P/CFO) ratio. Since the company remains in high-growth mode, it would be reasonable for investors to assume that Dutch Bros’ P/CFO ratio is sky-high.

Yet that’s not the case. Consider Dutch Bros’ P/CFO of 18 and 30% sales growth rate compared to a handful of its food and beverage peers.

Data from YCharts.

Currently, Dutch Bros has almost the same P/CFO ratio as its mega-peer Starbucks (SBUX 1.78%), yet the latter has struggled to deliver any growth over the last year. Meanwhile, companies like Celsius, Chipotle, and Cava sport similar growth rates as Dutch Bros but trade at much frothier valuations.

This reasonably priced growth is what makes an investment in Dutch Bros jump off the screen at me today. But this is only half the story.

To fund this growth in the past, the company had to lean upon secondary stock offerings to raise cash, which would dilute shareholder value by adding more outstanding shares. However, these offerings could be coming to an end, as Dutch Bros is very near becoming capable of self-funding its growth ambitions.

BROS Cash from Operations (Quarterly) data by YCharts

Steadily narrowing the gap between what it generates in CFO with what it spends on new store growth costs (capex), Dutch Bros is this close to funding its growth in-house. Should the company reach this breakeven point and put an end to diluting shareholder value with its historically rising share count, Dutch Bros’ share price would (theoretically) adjust to reflect these positive developments.

So, with the possibility of the company soon being able to self-fund its expansion across America, that leaves us with the question — how much more can Dutch Bros grow?

A long growth runway ahead for Dutch Bros

While management’s goal to reach 4,000 stores over the next 10 to 15 years may sound like a stretch, the company has opened at least 30 stores in each of the last 12 quarters, showing that this isn’t a fever dream. With its goal of opening around 150 new stores this year, Dutch Bros’ expansion could really accelerate if it proves capable of funding its own growth as its younger stores mature into more robust profitability.

One main reason that I’m optimistic these new stores will prove to be highly profitable over the long haul is that the company already generates roughly 67% of its transactions from its 2.3 million Dutch Rewards members. These sticky sales from loyal, repeat customers are critically important for two reasons.

First, they show that older stores should remain robustly profitable, as the company has already proven effective at launching unique drink ideas and promotions to drive visits. Meanwhile, it also means that new locations will be able to lean on the successful program to convert first-time customers into loyal members, using these promotions to bring new customers into their ecosystem.

With roughly two-thirds of the company’s stores in just five states — and no stores currently further north of Missouri or east of Tennessee — Dutch Bros’ expansion potential has decades of growth ahead of it. Trading with the cheapest valuation among its peer group and soon being able to self-fund its expansion plans, Dutch Bros’ growth story could prove to be a once-in-a-generation opportunity.