Shares of Beyond Meat (NASDAQ:BYND) have been volatile amid the coronavirus-led sell-off. The stock fell from US$120 in January 2020 to US$58 in March 2020. It’s currently trading at US$99.63.
Beyond Meat stock fell 8.4% yesterday after investment bank UBS downgraded it from “neutral” to “sell.” UBS also lowered its price target on Beyond Meat stock from $90 to $73. Analyst Steven Strycula was wary of the company’s disproportionate exposure to the ongoing pandemic.
Beyond Meat generates over 50% of revenue from restaurants and food service, an industry that has been decimated recently. In case global recession fears come true, many small restaurants will find it difficult to recover amid the ongoing lockdowns. According to Strycula, the benefits of Beyond Meat’s partnerships with large food chains such as McDonald’s and Starbucks are already priced.
While Beyond Meat will remain volatile in the near term, it remains a solid pick for the upcoming decade. There is a slow but steady transition towards plant-based meat substitutes at the global level. However, it will also have to contend with growing competition from companies such as Impossible Foods that have distribution deals with large grocery chains.
Beyond Meat stock is also trading at a hefty valuation. It has a forward price-to-sales ratio of 13.4 and a price-to-book ratio of 15. Growth stocks generally trade at a premium but are most vulnerable in a broader market sell-off.
Maple Leaf has a lower valuation compared to Beyond Meat
Beyond Meat is one of the better-known stocks in the alternative meat segment. However, a Canadian company is targeting this segment. Maple Leaf Foods (TSX:MFI) is one of the top meat distributors in North America. It is also expanding aggressively in the plant-based meat business.
According to a Markets and Markets report, the plant-based meat market is expected to grow from $12 billion in 2019 to $27 billion in 2025, indicating an annual growth rate of 15%. We can see why this space is attracting multiple players.
Maple Leaf reported sales of $3.94 billion in 2019. Analysts expect the company sales to grow to $4.28 billion in 2020 and $4.47 billion in 2021. Comparatively, its earnings per share are estimated to rise from 29.4% in 2020 and 28.4% in 2021.
The stock is currently trading at a forward price-to-earnings multiple of 30, which is not too expensive looking at its earnings growth. Further, it also has a forward yield of 2.4%. Maple Leaf recently increased dividends by 10.3% from $0.145 to $0.16. In the last five years, its dividends have grown by an impressive 30% annually.
Maple Leaf has a market cap of $3.26 billion, which means the stock has a forward price-to-sales ratio of 0.8. Its price-to-book multiple of 1.66 is also significantly lower than that of Beyond Meat.
Investors can consider Maple Leaf stock given its lower valuation, attractive estimated earnings growth and recent pullback. Maple Leaf stock is currently trading 26.5% below its 52-week high. Analysts covering the company have a 12-month average target price of $32, which is 21% higher than the current trading price.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
David Gardner owns shares of Starbucks. Tom Gardner owns shares of Starbucks. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends Beyond Meat, Inc. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.