Shares of meat substitute company Beyond Meat (NASDAQ: BYND) have taken investors on a wild ride ever since its IPO. Beyond Meat stock went public almost two years back at a price of $25 per share. It then touched a record high of $235 per share in July 2019 and is currently trading at $119 at the time of writing. So, for IPO investors BYND stock has returned close to 400%.
Despite its high volatility Beyond Meat stock is up 19% in the last year. It has however lost over 5% year to date and is down 50% from record highs.
As past performance does not matter much to future investors, let’s take a look to see if the company remains a solid bet right now.
Beyond Meat - An overview
Beyond Meat is a food company that manufactures, markets, and sells plant-based meat products in the U.S. and other international markets. It operates under the Beyond Meat, Beyond Burger, Beyond Beef, Beyond Sausage, Beyond Breakfast Sausage, Beyond Chicken, Beyond Fried Chicken, Beyond Meatball, the Caped Steer Logo, Go Beyond, Eat What You Love, The Cookout Classic, The Future of Protein, and The Future of Protein Beyond Meat and design trademarks.
It sells products through groceries, mass merchandisers, convenience stores, natural retail channels, restaurants, and foodservice outlets as well via an e-commerce platform.
The transition towards meat-based products will be a key driver for Beyond Meat’s top-line growth in the upcoming decade. The household penetration rates for the Beyond Meat brand in the U.S. have increased to 5.3% in 2020, a year over year rise of two percentage points.
While Beyond Meat has fewer SKUs (stock-keeping units) compared to competitors, its buyer rates have risen by 66% year over year in the last year. Further, the purchase frequency was up 39% while the repeat rate increased to 55.3% compared to 43.4% in 2019.
In its annual report Beyond Meat explained, “In other words, in 2020 we saw more US households buying our products, they were buying them more frequently, and, on average, they were spending more per household on our products.”
Revenue growth remains strong
Beyond Meat owns the top-selling SKU in all plant-based meat in the U.S. and accounted for a 19% market share in 2020, an increase of 450 basis points year over year. This has allowed the company to increase the top-line at a stellar pace.
In 2020, Beyond Meat reported revenue of $406.75 million compared to $297.8 million in 2019. The company’s sales stood at just over $16 million back in 2016. Now Wall Street expects BYND sales to grow by 41% year over year to $573 million in 2021 and by 51% to $865 million in 2022.
While still unprofitable, Beyond Meat is forecast to improve its bottom-line from a loss per share of $0.60 to earnings of $0.08 in 2022.
What next for BYND stock and investors?
BYND’s revenue growth decelerated amid the pandemic but it should recover in 2021 as economies reopen all over the world. In the December quarter, the company announced two new alliances with McDonald’s (NYSE: MCD) and Yum! Brands (NYSE: YUM) (the owner of fast-food chains including Taco Bell, Pizza Hut, and KFC) as investors continue to remain excited about Beyond Meat’s long-term growth potential that will arise from these partnerships.
Beyond Meat products are already available in 80 countries and in 122,000 retail outlets in Europe. The company is now looking to aggressively expand the reach of its meat-based substitutes to other international markets.
In terms of valuation, BYND stock is trading at a forward price to sales multiple of 13.1x which is reasonable compared to its estimated growth rates. It remains a top bet given Beyond Meat’s leadership position, strong brand recognition, improving bottom-line, aggressive expansion plans, and a rapidly expanding addressable market.
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