In a year in which some high profile initial public offerings have already taken place, plant-based burger and sausage maker Beyond Meat Inc (BYND)’s IPO has been an unqualified success. The stock was issued at a price of $25 back on 1st May this year but since then it has gone on a tear and climbed by as much as 125% on its opening day to hit $46.

However, the stock has continued to gain and the company now commands a market cap of over $6 billion. Beyond Meat’s performance overshadowed the much-anticipated IPOs of giants like Lyft and Uber.

Impressive Growth Trajectory

The primary reason behind the stock’s strong performance is due to the impressive growth trajectory that it has displayed. Sales rose by as much as 170% in 2018 and touched $87.9 million, while the growth for 2019 is projected to be 140%. The rate of growth in 2019 will take total sales to $209 million. These numbers are, without a doubt, impressive but there are other factors that need to be considered.

First and foremost, despite the strong sales growth and projected growth, it is important to keep in mind that Beyond Meat has made significant losses. In addition to that, the possibility of sales growth might already be priced into the current stock price of $102 and according to experts, even that price is an overestimation. Last year, Beyond Meat made a $30 million loss and it is unlikely that it is going to turn profitable in the next few years.

High Sales Multiple

In the packaged food industry, companies trade around twice the future sales but in the case of Beyond Meat, the stock is trading 27 times its future sales and that is an anomaly. Even in high growth industries like software and tech, companies trade at seven times their future sales at a maximum. The reason behind the valuation of the stock is also because of the industry in which Beyond Meat is engaged.

Over the past few years, animal welfare activists, environmentalists, vegans, and vegetarians have campaigned against animal meat extensively, which is why it could be argued that Beyond Meat has emerged at the best possible time. The company’s pea based meats have the possibility of capturing a large chunk of a market that could be worth $100 billion in 15 years, according to JP Morgan.

Last but not least, it is also important to point out that Beyond Meat would not have the market to itself and are going to be faced with intense competition soon. Impossible Foods is all set to become one of its biggest rivals, while Amazon’s Whole Foods Market also sells vegetable based meats.

Other giants like Nestle and Tyson Foods are also going to enter the market soon. However, the optimism surrounding Beyond Meat continues and a JP Morgan analyst gave the stock an outperform rating as he believes that a supply agreement with a fast food restaurant chain could be inked soon.

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