Three questions beyond meat should be asked now by investors

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The manufacturer of herbal meat substitutes is after the publication of its first earnings report as a publicly traded company, the stock has climbed 400% since its inception Introductory price, giving the company a market capitalization of approximately $ 7 billion. "data-reactid =" 12 "> The actions of the manufacturer of herbal meat substitutes are escalating after the release of solid results in its first earnings report as a publicly traded company more than a month after its launch, the stock has risen 400% from its $ 25 IPO, giving the company a market capitalization of approximately $ 7 billion.

It's easy to understand why investors are so excited about this alternative protein company. Its turnover more than tripled in the last quarter, reaching $ 40.2 million, an increase of 215%, and the company's forecasts indicate that this strong growth should continue. Management expects revenue growth of at least 140% to reach more than $ 210 million in revenue this year.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Still, investors might want to be cautious with Beyond Meat as a company now has a market value comparable to the well-established names of the agri-food industry as the poultry processor & nbsp;Pride of the pilgrim$ 6.7 billion, but generated revenues of nearly $ 11 billion last year. Before biting into Beyond Meat's shares, investors should ask themselves these three questions. "Data-reactid =" 14 "> Nevertheless, investors might want to be cautious about Beyond Meat because the company now has a market value comparable to that of well-established names. food industry as a poultry processor Pride of the pilgrim$ 6.7 billion, but generated revenues of nearly $ 11 billion last year. Before biting into Beyond Meat's shares, investors should ask themselves these three questions.

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Image source: Beyond the meat.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "1. Does it have a competitive advantage?"data-reactid =" 36 ">1. Does it have a competitive advantage?

It is clear that the alternative meat space is hot. Beyond Meat is not only experiencing exponential growth, but chains such as Burger King, Carl's Jr., TGI Friday's and White Castle are embarking on the trend of herbal burgers, thus becoming the product dominant.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "However, Beyond Meat is not the only one The private company Impossible Foods is perhaps its biggest competitor.Its brand Impossible Burger is now sold in chains such as Burger King, Applebee & # 39; s and & nbsp;Cheesecake Factory. & nbsp; "data-reactid =" 38 "> However, Beyond Meat is not the only supplier here, the private company Impossible Foods is perhaps its biggest competitor, its Impossible Burger brand is now sold in chains such as Burger King, Applebee's, and Cheesecake Factory.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "And not surprisingly, some major players lean towards an element of booming market. & nbsp; Through the Sweet Earth brand acquired in 2017, & nbsp;Nestlé & nbsp;plans to launch an "Awesome Burger" herbal in the US market this fall, & nbsp; & nbsp; and & nbsp;Tyson Foods (NYSE: TSN), the country's largest food company, has announced that it will start selling herbal meat products this summer. & nbsp; "data-reactid =" 39 "> And it is not surprising that some big players are expecting a share of the fast-growing market: through the Sweet Earth brand acquired in 2017, Nestle plans to launch an "Awesome Burger" herbal in the US market this fall, and Tyson Foods (NYSE: TSN), the country's largest food company, has announced that it will start selling herbal meat products this summer.

In other words, Beyond meat will soon have significant competition in a sector where barriers to entry are low.

The company claims that "research, development and innovation" represent essential competitive advantages. It also has patents and other intellectual property rights that protect its technology and methods. But his claim that he has a significant gap is about to be seriously challenged by personalities like Tyson, Nestle and others. At the very least, new competition is likely to drive down prices and reduce margins for the plant-based meat industry, and gain market share at Beyond Meat.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "2. Is it different from other recent dietary trends?"data-reactid =" 42 ">2. Is it different from other recent dietary trends?

The last major trend to transform this industry has been the rise of "organic" foods grown, raised and prepared without pesticides, hormones or additives that some people consider to be harmful to human health and the environment.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "While this niche has clearly been a growth driver in the food industry, with organic food sales in the United States having more than doubled in the last 10 years, reaching $ 45 billion, & nbsp; & nbsp; the history of organic food business "data-reactid =" 44 "> While this niche has clearly been a growth driver in the food industry, organic food sales in the United States have more than doubled in the last 10 years , to reach 45 billion dollars. business was very different.

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "By and large, specialized players like Whole Foods Market & nbsp ;United Natural Foods & nbsp;(NYSE: UNFI), Sprouts Farmers Market & nbsp;(Nasdaq: SFM) & nbsp; and & nbsp;Hain Celestial & nbsp;(NASDAQ: HAIN)& nbsp; have suffered as large food companies such as Kroger, Costco and others have invaded the organic food space, taking shares and lowering prices. "data-reactid =" 45 "> In general, specialized players like Whole Foods Market, United Natural Foods (NYSE: UNFI), Producers cabbage (Nasdaq: SFM) and Hain Celestial (NASDAQ: HAIN) have suffered as big food companies like Kroger, Costco and others have invaded the organic food space, taking shares and lowering prices.

The story continues

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Whole Foods, once a darling of the stock market, has saw its sales growth gradually slowed down in the mid-2010s and ended up selling in & nbsp;Amazon & nbsp;for $ 13.7 billion in 2017, about a third less than its value from its peak in 2013. "data-reactid =" 50 "> Whole Foods, which was once a stock market, saw its growth gradually slow down at middle of the 2010s, and he ended up selling to Amazon for $ 13.7 billion in 2017, about a third less than its value at its peak in 2013.

Organic food stocks, including United Natural Foods, a distributor of organic and natural foods, and Hain Celestial, which owns organic brands, including Garden of Eatin and Rice Dream, and table sprouts have fallen sharply in the last five years. expectations.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "HAIN given by YCharts"data-reactid =" 65 "> HAIN Data by YCharts

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Just like Beyond Meat, these two stocks and Whole Foods have jumped In the years following the financial crisis, when the trend of organic foods was only beginning to grow, the stock market was ravaged by competition, integration and mature growth of the commodities sector. organic. "data-reactid =" 66 "> In the image of Beyond Meat, two stocks and Whole Foods jumped in the years following the financial crisis, when the organic food trend was just beginning to emerge. pick up speed, but the competition, integration and mature growth of the organic sector have burned these stocks.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The rise and fall of the owner of The Cross & nbsp;National drinks & nbsp;(NASDAQ: FIZZ) offers another example. La Croix, a brand of flavored seltz, has become a staple of the millennium. New brands, such as Spindrift, as well as the big beverage companies, then arrived, which reduced the craze of La Croix and its market share to nothing. After a sudden rise, La Croix sales are down. Here again, the story is reflected in the stock chart. & Nbsp; "data-reactid =" 67 "> The rise and fall of the owner of La Croix National drink (NASDAQ: FIZZ) offers another example. La Croix, a brand of flavored seltz, has become a staple of the millennium. New brands, such as Spindrift, as well as the big beverage companies, then arrived, which reduced the craze of La Croix and its market share to nothing. After a sudden rise, La Croix sales are down. Here again, the story is reflected in the stock chart.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "sparkle given by YCharts"data-reactid =" 81 "> FIZZ data by YCharts

Beyond meat, investors need to ask how alternative meat is different from organic food or flavored seltzer. If the answer is "this is not the case", expect the story of Beyond Meat to take a similar end.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "3. Will everyone eat herbal meat in 10 years?"data-reactid =" 83 ">3. Will everyone eat herbal meat in 10 years?

At this point, Beyond Meat's bull thesis seems to be a bet that herbal burgers will be almost as popular in 10 years as traditional beef burgers. This appears to be the only way to justify the valuation of the company, which now stands at a forward price / sales ratio of 34 on the basis of this year's revenue forecasts, a level normally reserved for high-tech companies that are evolving strong growth, even experimental. biotechs.

Even Tyson Foods, one of the world's largest suppliers of poultry, beef and pork, has a value of $ 30 billion and generates an annual business turnover of 40 billion dollars. come since its IPO. It is clear that the company's management and underwriters had more modest expectations just a month ago, because of their decision to set the IPO price at $ 1.4 billion.

Nevertheless, there is reason to believe that herbal meat could actually transform. Demand for these products is currently outstripping supply, and Beyond Meat and Impossible Foods is struggling to grow to keep pace with orders. Many fast-food chains have avoided selling veggie burgers in the past; The debut of The Impossible Whopper by Burger King appears to be a validation of the herbal burger concept and suggest the company to see its potential to become a popular mainstream menu item.

Finally, there is an environmental argument for Beyond Meat and her herbal counterparts. Calorie for calorie, raising livestock is a much more ecological process for the environment than growing plants, in terms of space required and energy consumed, not to mention the impact of emissions methane from cattle and other animals. Herbal meat is a much more efficient way to feed more than 7 billion people worldwide. If its taste is about the same as that of animals, it is possible that consumers are opting massively for greener, healthier and greener products. potentially cheaper option.

At this point, it seems that the market has already incorporated such a food revolution into the Beyond Meat stock. If this really happens, the business could continue to be a big winner. But history – and the threat of competition – should suggest caution. Investors may want to take a small bites approach to this meat-producing business.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 89 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Jeremy Bowman owns shares of Amazon. The Motley Fool owns shares and recommends Amazon. The Motley Fool recommends Costco Wholesale, National Beverage and Nestle. The Motley Fool has a disclosure policy."data-reactid =" 97 ">John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Jeremy Bowman owns shares in Amazon. The Motley Fool owns shares and recommends Amazon. The Motley Fool recommends Costco Wholesale, National Beverage and Nestle. Motley Fool has a disclosure policy.