About Beyond Meat
Is plant-based meat really the future?
Well, famous investors such as professional basketball superstars Kyrie Irving, Chris Paul, Shaquille O’Neal as well as other well known professional athletes such as DeAndre Hopkins, DeAndre Jordan, JaVale McGee, Harrison Barnes among many others but not limited to other famed individuals like Leonardo DiCaprio, Snoop Dogg, Common and more seem to think so.
While that’s good and well, it certainly doesn’t mean that one should dive headfirst into the company’s stock (NASDAQ: BYND), blindly investing the entirety of their life savings into a company that they know little to nothing about simply because it has Snoop’s stamp of approval.
Thankfully, for those who want to analyze the company and its stock themselves, Beyond Meat runs a fairly simple business model.
The name of the game for this company is selling plant-based meat products ranging from steak, chicken, beef, sausage, meatballs and even jerky.
We’ll admit that it is not for everyone, however, we will also admit that there is a rather large following behind the plant-based food movement and this group is a seemingly loyal one, which is great for Beyond Meat and its shareholder base, as from our perspective it, to a major extent, shields the company from a variety of recessionary and cost-related threats, as its target consumer (literally in this case) isn’t likely to change their eating habits if they are convicted in their plant-based views.
Or so we think.
Regardless of where one stands on the plant-based spectrum, we figure, as has been the case for all of our previous stock analysis articles, that it is best practice if we let the numbers and other related financial figures and metrics speak for themselves.
Let the games begin.
Beyond Meat’s stock financials
Trading at a share price of just under $18, this company’s stock (NASDAQ: BYND) has taken an absolute dive of somewhere in the neighborhood of 72% over the last five year’s span of time.
We don’t think this is by any means all on Beyond Meat and its executives, as the market, especially for younger companies, has been quite brutal, as has been seen throughout some of our previous stock analysis articles.
This being the case, we think it is interesting to note and keep in the back of our minds as we progress through this analysis, as there could be more inherent opportunity as the company’s share price continues declining.
On the other hand, the company could just be inordinately unprofitable (on an annual, net basis) and/or lacking sufficient operational efficiency.
Regardless of rhyme or reason, let’s let the numbers plead their case.
Unsurprisingly, Beyond Meat’s stock (NASDAQ: BYND) doesn’t have a readily available price-to-earnings (P/E) ratio, which makes sense given that this company is likely growing (or at least trying) at a rapid rate and in the process of incurring loads of debt in the process.
This is one of those companies that needs to retain and reinvest any earnings it can at all costs.
Additionally, this is most likely why this $1.1 billion company doesn’t offer its common shareholders an annual dividend, which again, we don’t mind one bit.
Taking a stroll down Balance Sheet Avenue, Beyond Meat’s executive team is tasked with properly tending to and deploying nearly $1.1 billion in total assets along with around $1.3 billion in total liabilities.
Although we wouldn’t have preferred this company to have more total liabilities than total assets, given its current phase of growth it makes complete sense and this company isn’t as liability-heavy as we would have originally presumed, which obviously is a positive.
What we are really worried about regarding this company’s overall balance sheet structure is whether or not it will be able to sufficiently contain the amount of its total liabilities, which we understand is likely to grow in the coming years, but it must be controlled and properly managed in order to keep this business running and its doors open.
That’s just some food for thought.
Come on, we had to do it.
Moving right along to the company’s income statement, there’s a red flag (from our vantage point) on the play with Beyond Meat’s recently reported total annual revenue.
Specifically, even though the company’s total revenue has risen a few times over between 2018 and 2021, standing at around $88 million in 2018 and skyrocketing to somewhere in the neighborhood of $464 million (2021), the company reported a softening in total annual revenue, reporting in 2022 the company’s total revenue as a hair under $419 million.
It is our view that, even in this current frothy macroeconomic environment filled with headwinds aplenty, the last thing that should be happening with Beyond Meat’s total annual revenue is deceleration.
This company should be exponentially generating more and more total revenue each year and we don’t think there are many plausible reasons for this company to experience any sort of decline or slowing of growth in terms of total annual revenue, unless its consumers aren’t as loyal as we originally thought.
Last pun, ok?
Ok, one more.
We have (plant-based) beef with this company’s recent total annual revenue figures.
Putting our concerns regarding the company’s weakening revenue to the side, the company’s cash burn as commonly found on its cash flow statement through its net income has been bad, but not as bad as we had initially anticipated, at least, not until recent years.
For instance, the company’s net income since 2018 has been negative, however, some years have been a whole lot less negative than others. In 2019, the company reported a negative net income of -$12 million, which is as close to positive as it has been between 2018 and 2022, however, there has been no retardant readily available for this company’s cash fire as it has grown increasingly more negative since then, to its latest reported figure on TD Ameritrade’s platform of -$366 million, in 2022.
Its revenue is decelerating and its negative cash flow is accelerating to even more and more negative levels.
Generally, this is far from a good combination.
Beyond Meat’s stock fundamentals
Not to twist the blade, but the company’s trailing twelve month (TTM) net profit margin is far from encouraging as well.
Specifically, the company’s TTM net profit margin, according to TD Ameritrade’s platform sits at -82.87% compared to the industry’s average of 3.50%.
This frightens us on two counts.
One, the company is a long, long way from becoming net profitable and what is even more concerning to us, investors with long-term lenses, is the fact that even if Beyond Meat were to somehow catch up and carve out a positive TTM net profit margin, a 3.5% net profit margin doesn’t excite us at all, especially for a space that should likely have some higher net profit margins given that many are willing to pay a premium for plant-based alternatives.
It is also worth noting that the company’s TTM annual returns on both assets and investment are overwhelmingly negative, respectively standing at -28.44% and -30.57%, also according to TD Ameritrade’s platform.
Should you buy Beyond Meat stock?
Even when things are (or if) eventually good for this company, they aren’t, from our perspective.
This industry has a really, really low TTM net profit margin and combining the objective slowdown in total revenue and somewhat feeble state of the company’s balance sheet, we are not fans of Beyond Meat’s stock.
Although we give the green light for the company to prove us wrong and give us a new perspective and outlook on the efficacy of the company and its products and the plant-based category as a whole, we are not even close to being willing to assume that risk at the moment.
These are some of the reasons we are most comfortable with giving Beyond Meat’s stock (NASDAQ: BYND) a “sell” rating.
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.