Plant-based meat products seller Beyond Meat, Inc. (BYND) is currently facing administrative issues. Recently, the company’s COO Douglas Ramsey was arrested and consequently suspended over allegations of biting a man’s face after a University of Arkansas American football game in Fayetteville. Moreover, Bernie Adcock announced that he would step down as its chief supply chain officer.

On top of it, alternative protein brands are witnessing sales declines. Fake meat brands are expensive compared to traditional proteins. Therefore, with food inflation reaching 11.4% in August, shoppers seem to opt for cheaper options.

BYND’s stock has declined 87% over the past year and 77.4% year-to-date. It is down 40.6% over the past month to close its last trading session at $14.73.

Here are the factors that could affect BYND’s performance in the near term:

Stretched Valuations

In terms of its forward EV/Sales, BYND is trading at 3.34x, 103% higher than the industry average of 1.65x. The stock’s forward Price/Sales multiple of 1.92 is 73.9% higher than the industry average of 1.10.

Bleak Financials

For the fiscal second quarter that ended July 2, BYND’s net revenues decreased 1.6% year-over-year to $147.04 million. Adjusted net loss and adjusted net loss per common share rose 394.3% and 393.5% from the prior-year quarter to $97.13 million and $1.53.

Bleak Profit Margins

BYND’s trailing-12-month gross profit margin of 6.70% is 79.5% lower than the industry average of 32.63%. Its trailing-12-month net income margin and levered FCF margin of a negative 71.78% and 70.69% are significantly lower than their respective industry averages of 4.93% and 3.06%.

Its trailing-12-month ROE, ROTC, and ROA of a negative 320.69%, 15.04%, and 27.32% compare to their respective industry averages of 12.21%, 6.21%, and 4.77%.

POWR Ratings Reflect Bleak Prospects

BYND’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BYND has a Growth grade of F in sync with its bleak financial growth. It also has an F grade for Quality, consistent with its bleak profitability margins. The stock has a Value grade of D, justified by its stretched valuations.

In the 86-stock Food Makers industry, it is ranked #85.

Click here to see the additional POWR Ratings for BYND (Momentum, Stability, and Sentiment).

View all the top stocks in the Food Makers industry here.

Bottom Line

BYND’s recent executive suspension could make investors anxious. Moreover, alternative proteins are facing a demand slowdown. With analysts predicting the company’s EPS to decline 78.4% year-over-year in the current year (fiscal 2022), the stock might be best avoided now.

How Does Beyond Meat, Inc. (BYND) Stack Up Against its Peers?

While BYND has an overall POWR Rating of F, one might consider looking at its industry peers, Grupo Bimbo, S.A.B. de C.V. (GRBMF) and Industrias Bachoco, S.A.B. de C.V. (IBA), which have an overall A (Strong Buy) rating, and John B. Sanfilippo & Son, Inc. (JBSS) and Ajinomoto Co., Inc. (AJINY), which have an overall B (Buy) rating.

BYND shares were trading at $15.86 per share on Wednesday afternoon, up $1.13 (+7.67%). Year-to-date, BYND has declined -75.66%, versus a -21.47% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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