About BellRing Brands

We’re proud to say that we know little to pretty much zilch about the protein shake industry.

Well, ok, that was a little harsh but hopefully you get our point.

Maybe it might be more appropriate to say that we just don’t know much about the protein shake industry but we’re nevertheless unequivocally excited to talk about and objectively analyze one of the leaders in the space, BellRing Brands.

Headquartered in St. Louis, Missouri, BellRing sells what is categorized as “ready-to-drink” or “RTD” protein shakes along with supplemental powders, mixes, nutrition bars among a few other exercise protein-focused products and offerings, according to TD Ameritrade’s platform.

The company is reportedly home to two main brands; Premier Protein and Dymatize.

From what we have gathered so far, both of these companies are heavyweights in the protein drink space.

Before delving into the company’s financials, we think it is worth mentioning that while we are ultimately uncertain as to whether or not the protein shake space (and its related, counterpart industries) is recession proof or not, we have our fair share of guesses and opinions on the matter.

Namely, those who are regulars at their local gym or Planet Fitness 15 hours of the day aren’t likely to give up their protein shakes and/or bars just because the economy is in a state of weakness. The gym community as a whole, from our vantage point and experience, is a loyal one and once they find something they like, they stick with it like no tomorrow.

Therefore, it is our view that protein supplements are no exception, which leads us to think proven leaders and their products in this industry are rather resistant from a recession.

Regardless of our views as to whether or not the protein supplement space is recession resistant, it is critical that one devises their own personal views on this matter and invests according to their parameters, in all senses of the word. 

Let’s get formally introduced to BellRing’s financials.

BellRing’s stock financials

Trading at a share price of around $26, BellRing has a market capitalization of $3.52 billion, a price-to-earnings (P/E) ratio of 34.28 and does not currently issue an annual dividend to its shareholders.

Based on these preliminary metrics, the company’s share price seems a bit overvalued at the moment since its P/E ratio is far greater than that of which represents fair value, which is typically said to be when a P/E is 20 while subsequently anything higher than 20 indicates that a stock or security is trading at a value higher than its true present worth.

Even though this isn’t ideal, it would be silly if we didn’t venture onward and gather more information on the company and its financials since a valuation issue can naturally be resolved by a fall in share price throughout the course of a prolonged bear market or simply a mediocre quarterly earnings call.

According to the company’s balance sheet, BellRing has $707 million in total assets paired with around $1.1 billion in total liabilities.

To us, this is a little worrisome as we prefer the companies that we might potentially invest in to have asset-heavy balance sheets when going into a period of what we think is a deeper than anticipated recessionary state, as opposed to being liability-heavy before the brunt of the economic storm that is to come.

There is a high likelihood that BellRing will be forced to take on some more debt in order to sufficiently finance its operations and keep the doors open, which in this case will further entrench the company in its already liability-heavy state.

All that to say, we are not by any means the biggest fans of the company’s current balance sheet scale as it is tilted a bit too heavily on the liability side.

However, on a more positive note, BellRing’s total revenue over the last five years (according to the company’s income statement) has risen each year. Specifically, the company’s total revenue in 2018 stood at $828 million and has gone up to approximately $1.3 billion as of its latest report.

If the company’s total revenue was stagnant or even steadily declining in 2018, we would do our best to stay as far as humanly possible away from this company’s stock, however, rising revenue implies that the company and its management team is doing something right.

Perhaps the company has formed new partnerships with companies that can help push its products such as Amazon, GNC, Planet Fitness and/or Life Time among other local stores and gyms filled with BellRing’s target audience(s).

As it relates to the company’s cash flow statement, BellRing’s net income during the same period remained fairly consistent (and positive, for that matter), standing at $96.1 million in 2018, $123.1 million the following year and panning out slightly lower to its most recent report of $116 million (as reported on 9/30/2022).

Although this isn’t resoundingly a good or bad sign, it is assuredly more good than bad, as the company’s net income has seemingly stayed resilient even during the prevailing supply chain pressures, COVID-19-related pressures among many other stresses imposed on not only BellRing but other small and large, private and public businesses as well.

BellRing’s stock fundamentals

As far as the company’s trailing twelve month (TTM) net profit margin, BellRing’s is currently pegged at 8.46% compared to the industry’s average of 9.86%. Although we don’t see this as a material difference, we would definitely like to see BellRing’s TTM net profit margin improve coming out of the years following the current recession. 

Lastly, we’d like to mention that BellRing’s TTM return on assets is notably higher than that of the competition’s average, standing at 16.53% to the industry’s average of 5.46%, according to TD Ameritrade’s platform.

Should you buy BellRing stock?

Clearly, there is a lot of good and bad with BellRing and its stock.

Although it seems like quite the mixed bag, as we don’t like the company’s balance sheet at the moment yet we are fans of the company’s TTM return on assets and its resilient historical revenues, BellRing is a staple in the protein shake and bar spaces and that’s likely not changing anytime soon, at least, from how we see it.

Nevertheless, the state of this company’s balance sheet is discouraging to us, especially in the current economic environment and therefore we deem it most appropriate to give BellRing’s stock a “sell” rating.

This article is proudly sponsored by the Business Ethics Team at the University of Texas at Austin!

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.