2 Growth Stocks Down 40% to Buy Right Now
Key Points
Dutch Bros and Deckers Outdoor are two growing consumer brands with share prices down around 40% or more from their highs.
Dutch Bros is steadily expanding its drive-thru beverage shops across the U.S.
Deckers sees "untapped" growth potential for Hoka footwear in international markets.
- 10 stocks we like better than Dutch Bros ›
Stock market volatility will test even the most patient investors, and many growth stocks have been hit hard over the past year. Dutch Bros (NYSE: BROS) and Deckers Outdoor (NYSE: DECK) are two growing consumer brands that have seen their share prices fall 40% or more from their previous highs.
However, nothing has changed these companies' long-term prospects. Here's why these stocks should be rewarding long-term investments.
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Dutch Bros
Dutch Bros is gradually expanding its drive-thru beverage shops across the U.S., giving investors the chance to profit from that growth curve. The stock is currently trading about 40% off its previous high, while its quarterly revenue has more than doubled since the end of 2022.
The stock's high price-to-earnings ratio of 81 might look expensive, but Dutch Bros is still expanding margins as the business grows. After the pullback, the price-to-sales ratio sits around 4 -- a reasonable price for a fast-growing restaurant concept.
The stock is down, yet the business continues to expand. The combination of new shop openings and solid same-store sales growth drove a 29% year-over-year increase in revenue during the fourth quarter. Profitability is moving in the right direction, with net income rising from $6.4 million in Q4 2024 to $29.2 million in Q4 2025.
Dutch Bros is cultivating a loyal customer base that makes repeat visits. It now has more than 15 million members in its rewards program. Importantly, three-quarters of transactions are driven by these customers.
The company has more than 1,100 shops nationwide, leaving plenty of room for expansion. Management sees long-term potential for 7,000 locations. This is an opportunity to buy a proven growth story at a more reasonable price.
Deckers Outdoor
Many investors thought Deckers' Ugg footwear line was a fad in the early 2000s, yet a $1,000 investment in 2006 would be worth $53,000 today -- and that's after the stock's recent 53% sell-off. Over that time, the stock has experienced four 60% drawdowns, and each time it has recovered. The current pullback could be another great buying opportunity.
Uggs are still selling strong every year, but Hoka is emerging as the company's next growth engine. The strong growth for both brands has driven strong double-digit annual growth in recent years. Over the last three years, Deckers' revenue grew at a 16% annualized rate, with net income up nearly 29%.
Despite a choppy consumer spending environment, the company is still seeing sales and earnings grow. In the recent quarter, total net sales grew 7% year over year, and earnings per share increased 11%. Obviously, the lower growth rate explains why the stock has fallen, but it also explains why investors can buy shares at an attractive valuation.
The stock trades at just 15 times forward earnings estimates. With management still calling out "meaningful untapped global opportunities" for Hoka, this top shoe stock offers a compelling opportunity for new investors.
Should you buy stock in Dutch Bros right now?
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deckers Outdoor and Dutch Bros. The Motley Fool has a disclosure policy.
