If there were any investors who doubted the potential of the animal-free protein revolution, then they should look at Beyond Meat's (BYND 0.94%) first-quarter 2019 earnings report.

Those results show that the plant-based protein developer enjoyed year-over-year revenue growth of nearly 215%, spurred by a 491% surge in sales from restaurant and food-service distribution channels. Retail sales grew by a more pedestrian 111%. Meanwhile, management expects full-year 2019 revenue of at least $210 million, which would mark a 140% increase from last year.

Shares surged to new all-time highs in after-hours trading following the report. While the new $6.5 billion market cap prices in a lot of future growth, the business is certainly doing its part to earn the premium. Here's what investors need to know about the Q1 operating results.

A businessman with his laptop sitting on a cartoon rocket ship.

Image source: Getty Images.

By the numbers

Beyond Meat is in the most promising part of its growth trajectory, but the business is well positioned to continue growing for the foreseeable future. New product launches, a new manufacturing facility in Europe (close to the world's most prolific producer of peas, the source of the company's animal-free protein, and just miles from the world's cheapest sugar beets, the source of the beetroot juice that makes Beyond Burgers "bleed"), and expanded relationships with restaurants promise to keep the animal-free protein platform humming along.

One look at Q1 results suggests the latter might be most important. Apparently, Beyond Meat wasn't kidding when it told investors it had the fastest-growing product launch in the history of both TGI Fridays and A&W Canada. 


Q1 2019

Q1 2018

Year-Over-Year Change

Retail revenue

$19.6 million

$9.3 million


Restaurant and food-service revenue

$20.6 million

$3.5 million


Total revenue

$40.2 million

$12.8 million


Gross profit

$10.8 million

$2.0 million


Operating income

($5.3 million)

($5.6 million)


Net income

($6.6 million)

($5.7 million)


Data source: Press release.

The surge in sales from restaurant distribution channels led to an eye-popping 424% increase in gross profit. That allowed Beyond Meat to ramp up investments in the business and cover increased overhead expenses while keeping operating losses in check. It also allowed the business to reduce the impact of discounts offered through direct sales channels, which settled at $3.1 million in Q1. While those discounts increased 98.5% from the year-ago period, the investment delivered a 111% increase in retail sales. Moreover, discounts shrank to just 7.5% of revenue, compared with 12.3% in Q1 2018.

Don't dismiss a sky-high valuation

While high-growth stocks tend to fetch healthy -- and sometimes gaudy -- market valuations, investors might not want to overlook what a $6.5 billion market valuation means. Even if Beyond Meat achieves its full-year 2019 revenue target of $210 million, then shares would be trading at over 30 times sales.

There's certainly a novelty to animal-free protein products right now, but that could wear off as the market welcomes more entrants -- and there are many. The avalanche of coming competition will give restaurants more leverage when inking partnerships and consumers more choice, which could put significant pressure on gross margins.

Beyond Meat reported product gross margin of 25% in Q1, which is likely to rise in the near term given the platform's growth trajectory. But, by comparison, Tyson Foods achieves half that while generating annual revenue of $40 billion. It sports a market cap of $30 billion. It's an imperfect comparison, but provides some helpful context for open-minded investors and suggests the party will come to an end one day. The question for investors: Will that day arrive before the business grows into its premium valuation?

One thing is for sure: that day is not today.