It shouldn't have taken an analyst's downgrading Beyond Meat (BYND 0.80%) to a "neutral" rating for investors to realize the stock was overvalued. Losing a quarter of its value in one day shows just how far out of whack the stock behind the purveyor of plant-based meat had gotten.

Yet there are reasons beyond valuation why investors might want to take a harder look at Beyond Meat.

Boy ready to take big bite out of burger

Image source: Getty Images.

A good story

Beyond Meat was certainly a market darling right after its IPO, and its first quarterly earnings report as a public company indicated huge potential for its business. Revenue soared 215% in its fiscal first quarter on a near-500% increase in sales to restaurants and food service companies. It was an indication there may be more of a market for its burgers and sausage than originally believed.

Both Beyond Meat and rival Impossible Foods are breaking into mainstream restaurant chains, with the former being served at chains like BurgerFi, Carl's Jr., Del Taco, and TGI Friday's, while the latter is in Applebee's, Burger King, Cheesecake Factory, and Red Robin Gourmet Burgers. Beyond Meat also just announced that its new "meatier" 2.0 patties will be shipped to grocery stores nationwide, and said they're currently sold in more than 30,000 retail and food service outlets worldwide. On Wednesday, the world learned Tim Hortons is serving Beyond Meat breakfast sandwiches.

Though availability is widening, here are six reasons investors may want to use caution, above and beyond an elevated stock price.

1. A limited market

While anyone might buy and enjoy a Beyond Burger, vegetarians and vegans are those who would be most responsive to the product, and they represent a very small portion of the U.S. population, 5% and 3%, respectively.  So the company is trying to tap into other consumer trends that have a larger potential audience, including individuals concerned about climate change, resource conservation, and animal welfare.  It is also looking to international markets to increase its addressable market.

2. Growing competition

Beyond Meat faces an increasing number of competitors in the plant-based meat-alternative field, including start-ups and companies with substantially deeper pockets and more marketing muscle.

Nestle (NASDAQOTH: NSRGY) launched a meatless burger in Europe this past April under its Garden Gourmet brand, partnering with McDonald's (NYSE: MCD) in Germany, and will introduce it in the U.S. under its Sweet Earth banner later this year. And just last month Tyson Foods (NYSE: TSN), which had been an investor in Beyond Meat until its IPO, announced it will be launching a plant-based meat substitute this summer.

3. Visibility may be limited

Although Beyond Meat is trying to compete against real meat and is expanding its supermarket footprint, placement may not be ideal, as some grocery stores are leery of putting the burger in the meat case lest they confuse consumers. Instead, some stores place the patties where other vegan foods like tofu are kept, and while grocers say sales have been good regardless of placement, reinforcing the burgers' association with a specialized diet means that the chance to appeal to a broader cross section of consumers will be limited.

4. The health argument isn't black-and-white

Although it seems like a plant-based burger should have a "cleaner" ingredients label, it's actually more complicated. An animal meat burger has one ingredient: beef. A Beyond Meat burger, on the other hand, has 18 ingredients: water, pea protein isolate, expeller-pressed canola oil, refined coconut oil, rice protein, natural flavors, cocoa butter, mung bean protein, methylcellulose, potato starch, apple extract, salt, potassium chloride, vinegar, lemon juice concentrate, sunflower lecithin, pomegranate fruit powder, beet juice extract. And don't forget there's more to a burger than just the protein.

Carl's Jr. bills its Beyond Famous Star Burger -- featuring a meatless Beyond Burger -- as a "healthier option," but once you add a bun, cheese, lettuce, tomato, mayo, pickles, onions, and special sauce, you're looking at a sandwich with 710 calories, 40 grams of fat (no saturated or trans fat, though), 1,550 milligrams of sodium, and 12 grams of sugars. A McDonald's Big Mac nutrition label is slimmer than that with 540 calories, 28 grams of fat (10 grams saturated and 1 gram trans), 940 milligrams of sodium, and 9 grams of sugars. On the carb front, the Carl's Jr. burger has 61 grams while the Big Mac has 46. In a cholesterol matchup, the Carl's Jr. sandwich has 30 milligrams while the McDonald's sandwich has 80. 

5. More expensive than beef

Beef is expensive, no question, but two Beyond Meat quarter-pound patties at Target sell for $6, or the equivalent of $12 per pound. A one-pound package of 93% lean ground beef at Target goes for $5, or less than half the price.

You will also pay $2 more for the Beyond Meat option at Carl's Jr. than you would for the same beef burger, which might cause meat fans to question why you would pay up for near-meat when you could have the real thing for less.

6. Foodborne illness risk

While a foodborne illness outbreak can affect any restaurant or food company, the U.S. Centers for Disease Control and Prevention found produce was more than twice as likely to contribute to an illness or death as meat or poultry. Beyond Meat has wisely warned in its SEC filings that such contamination is a possibility and would have an adverse material effect on its business.

That might be so much boilerplate, and it is a risk that could strike any food company, and one they similarly highlight, yet it can't be ignored.

Beyond the burger

One risk that Beyond Meat is mitigating is that until recently it didn't make a "significant portion" of its burgers, but rather farmed out the process to two third-party manufacturers, CLW Foods and FLP Foods. Ironically enough, they are two big ground-beef producers. However, Beyond Meat recently expanded the number of co-manufacturers to five, and it is building out its own capabilities, opening a new facility in Europe, mitigating the risk of a processor shutting it out.

There is a market for plant-based meat alternatives, and Beyond Meat is tapping into it. But there are some significant challenges that should have called into question its recent sky-high valuations.

Even after being taken down a notch or two, investors should still be cautious taking a bite out of this stock.