![]() ![]() Of course, there’s also a potential scenario where Beyond Meat’s products fail to gain mainstream acceptance, or get squeezed out by their competition, and the firm never generates consistent profits. ![]() For reference, the company’s invested capital grew by an average of $84 million a year in 20. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. See the math behind this reverse DCF scenario.Įach of these scenarios also assumes Beyond Meat is able to grow revenue, NOPAT and FCF without increasing working capital or fixed assets. Sources: New Constructs and company filingsĮven if we assume that Beyond Meat executives focus on profitability rather than revenue growth and can achieve an 8% NOPAT margin (higher than Tyson) and grow revenue by 24% compounded annually for the next decade, the stock is worth just $43 today - a 66% downside to the current stock price. For reference, Allied Market Research projects the entire meat substitute market will be worth $8.1 billion in 2026.įigure 3 compares the stock’s implied future NOPAT to the firm’s historical NOPAT.įigure 3: Beyond Meat’s implied profit growth In this scenario, Beyond Meat would earn over $12 billion in revenue in 2034, which is greater than Conagra’s trailing 12 month (TTM) revenue and just below Kellogg’s TTM revenue. See the math behind this reverse DCF scenario. To justify its current share price of $126, Beyond Meat must immediately improve its net operating profit after tax ( NOPAT) margin to 6% (double its current NOPAT margin and equal to the highest margin in Tyson Foods’ history) and grow revenue by 28% compounded annually for the next 15 years. This analysis reveals that the stock is already priced for perfection, and anything less than mainstream acceptance leaves investors with significant downside risk. ![]() The biggest question facing the company, and any competitors, over the next few years is whether its products will gain mainstream acceptance as a form of meat, or if they will always be treated as a niche, alternative product.īelow, we use our reverse discounted cash flow (DCF) model to quantify the cash flow expectations baked into its current stock price. This competitive disadvantage only makes Beyond Meat’s path to sustainable profitability that much more difficult. Furthermore, many of the firms in Figure 2 have other key advantages - multiyear relationships and existing distribution networks with grocery stores or, in the case of Kroger, control of distribution and the end-consumer relationship.Īs Kroger invests further in its Simple Truth brand, we’d expect the firm to allocate more shelf space to its own in house brands, rather than a competitor such as Beyond Meat. Low margins in an increasingly competitive industry leave Beyond Meat with less flexibility to compete on price. Per Figure 2, Beyond Meat’s core earnings margin is only higher than Kroger’s and a fraction of many of its direct competitors. More importantly than just the number of competitors, Beyond Meat’s profitability ranks near the bottom of this group. This list isn’t exhaustive, and doesn’t include the many meat-based products that Beyond Meat competes against for consumer dollars. Happy Little Plants, owned by Hormel Foods. ![]()
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