How to Read Beyond Meat's Earnings Report

Beyond Meat (BYND 4.62%) will report earnings after the close on Monday, which means by the time you're reading this, the numbers will be out there. But how can individual investors respond to hard data when stock of the company in question has lost its connection to the fundamentals?

In this segment of the MarketFoolery podcast, host Chris Hill and senior analyst Emily Flippen weigh in on what we ought to be watching and why -- because almost regardless of whether Beyond Meat missed or beat its forecast, the stock is one to be handled with caution.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on July 29, 2019.

Chris Hill: After the market closes today, Beyond Meat issues their quarterly earnings. What should we be looking for in this? We talked a little bit about this on Motley Fool Money the other day. This is a stock that really seems like it's in the mania zone in terms of what is happening with it. Every little announcement that comes out from Beyond Meat over the past month or so seems to do nothing but push the stock up higher. I should add parenthetically, it's down about 5% today, but it's up almost 50% over the past month.

Emily Flippen: I'll just add on there that anybody who's maybe planning on trying to buy Beyond Meat as a result of today's earnings call, that is not investing at that point, it is gambling, simply because the valuation here has not had any reasonable basis behind it. That's not to say that I think the stock is going to perform poorly. But it is to say that we could see a great earnings report this quarter and the stock could be down or it could be up 20%. It's a stock that's hard to predict, and doesn't move rationally with the market.

With all of this being said, the market's looking for revenue of just over $50 million, which would be over 200% where it was a year ago. But given its last quarter, it does seem reasonable. They're going to need to post impressive growth in both their retail segment, which is your basic consumer going into a grocery store and buying Beyond Meat, as well as their restaurant segment, which is third-party restaurant sales. They're also going to need to prove that they can meet all of this demand. There's a big question last quarter about whether or not they had the capacity to meet skyrocketing demand, or if we're going to see a production bottleneck. We haven't seen that yet. I'm not sure if we will see it. But undoubtedly, people are looking to see, how is production ramping up to meet all of this demand? And that demand is a lot. We've seen recently that Dunkin' Brands is starting to add a Beyond Meat sausage to their breakfast lineup joining Tim Hortons in that. There's lots of different levers that Beyond Meat still has to pull, and a lot of potential partnerships that could make Beyond Meat become the dominant meat alternative.

But even with this revenue of over $50 million, they're still projected to lose $4.5 million. It's important to remember that this is not a profitable company. That would be less than their loss last year at $7.4 million, but still a loss nonetheless. Remember that this is ultimately a $14 billion company. To say that it's cheap would be a gross understatement. But that being said, I would not go out and short this company yet because the market has proven that it can stay irrational on this company longer than investors can stay liquid. I'll be excited to see what's reported. I have no clue how the market will respond. Even if they meet expectations. It could be a good thing, it could be a bad thing. Either way, it's exciting!