While large, well-known companies typically dominate business news coverage and investors' attention, it can be worth looking into somewhat lesser-known stocks in the hopes that they will provide better investment opportunities. One section of the market you may want to look at is the mid-cap stock zone, which includes companies with market caps of $2 billion to $10 billion.

Sirius XM (SIRI -5.37%) and Dutch Bros (BROS -9.02%) fall into the mid-cap stock category. Both are respected consumer brands with long business histories, though they operate in very different market segments. But which of them has the better long-term return potential?

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Sirius XM

Sirius XM consists of its namesake business and Pandora. Sirius XM offers a variety of radio content via satellite, and primarily generates revenue from subscriptions. Pandora provides audio content like music and comedy via streaming, and garners most of its revenue from advertising.

In the fourth quarter, the satellite radio business accounted for nearly three-quarters of its total revenue. However, the division's top line sagged 6% to $1.6 billion. On the positive side, after losing self-pay subscribers in several recent reports, the number grew by 149,000 in the fourth quarter.

The Pandora and off-platform business faces challenges. Self-pay subscribers fell by 101,000 during the final quarter of the year, which management partly attributed to a broad price hike on March 4.

The company's total quarterly revenue dropped 4.3% year over year to under $2.2 billion. If the Sirius XM satellite radio business can maintain its subscriber growth momentum, the company could stem its revenue decline. However, management has forecast revenue of $8.5 billion for this year, which would be a decline of more than 2% from 2024.

On the bright side, management has kept a careful eye on costs, and its fourth-quarter diluted earnings per share increased nearly 24% to $0.83.

Dutch Bros

Dutch Bros, launched more than three decades ago, had nearly 1,000 drive-thru shops serving mostly beverages as of the end of 2024. While half of its offerings consist of coffee and coffee-based drinks, it splits the rest of its menu about equally between energy drinks and refreshments (e.g., tea, lemonade, and smoothies).

With a focus on speed, quality, and service, it has clearly struck a chord with consumers. Dutch Bros' fourth-quarter same-store sales increased by 6.9%. Two-thirds of the increase came from higher average spending per customer and the balance from increased traffic. That's a good combination. Management projects that same-store sales will increase by 2% to 4% this year.

The chain opened about 150 stores last year. However, with locations in just 18 states so far, Dutch Bros has a large expansion opportunity. Management plans to open at least 160 shops this year.

The company also operates profitably. Dutch Bros reported earnings of $0.03 per diluted share on a generally accepted accounting principles (GAAP) basis in the fourth quarter compared to a $0.02 per share loss a year earlier.

The decision

Dutch Bros' success isn't a secret, of course. Through March 30, the stock was up by about 88% over the last 12 months. During that same period, Sirius XM's shares lost 42%, and the S&P 500 index rose 6.7%.

That gain has allowed Dutch Bros to maintain an expensive valuation. The stock trades at a price-to-earnings (P/E) ratio of 182 compared to Sirius XM's 8.

However, at some point, Sirius XM will have to grow its revenue if it's going to sustain profitability growth. It faces challenges, including heavy competition. Dutch Bros has a friendly drive-through concept that clearly works and a big expansion opportunity that makes it the clear choice for long-term investors. 

If the valuation makes you nervous, you can employ dollar-cost averaging that will smooth out your purchases over time.