Not too long ago, plant-based meat substitutes were relatively unheard of outside of niche markets in the United States. But with a national push for healthier foods that have less of an impact on the environment, companies like Los Angeles based Beyond Meat (NASDAQ:BYND) have risen in popularity. 

When Beyond Meat went public in May, the company witnessed a 163% one day increase in the share price -- a feat that hasn't been seen since the year 2000. Now just six months from its debut, Beyond Meat has had its share price increase from an IPO price of $25 per share to near $85.

A price jump this large may make it seem like you have missed the chance to get in on Beyond Meat, but that couldn't be farther from the truth. In these six months, Beyond Meat has become a juggernaut in the alternative meat sector and demand hasn't been higher.

Here are two reasons investors should pay attention to Beyond Meat: improving financials and strong growth potential.

Picture of Sandwich with the words "Plant Based" as the patty

Image Source: Getty Images

Beyond meat continues to beat financial expectations

After the bell on October 28, Beyond Meat released its third-quarter results for 2019. Analysts estimated that, for the quarter, Beyond Meat would post only $0.03 per share of earnings and about $82 million in revenue. All expectations were blown out of the water with the actual per-share earnings reaching $0.06 and revenue topping $92 million.

What is even more impressive with this quarter's results is that it was the first time that Beyond Meat has turned a profit as a public company. Revenue and orders were so good this quarter that Beyond Meat has raised its yearly revenue guidance more than $25 million to a range of $265 million to $275 million.

One downside in the earnings presentation is that Beyond Meat is facing greater retail competition. This increase in competition may lower retail margins in the future but executives in the company feel that this should not negatively affect future financials. Granted, this is usually what management says whenever a company faces dwindling profit margins or financials.

What is important for future financials is whether or not management can effectively increase product demand. Because as retail margins shrink, Beyond Meat will need to sell greater volumes of product to sustain the current level of profitability. But insiders are selling their pre-IPO shares which could signal that Beyond Meat will not be able to increase demand to keep up with shrinking profit margins.

Even founder and CEO Ethan Brown had previously sold about $7.2 million worth of stock in a secondary offering back in August. Since then, Brown has publicly stated that he plans to hold on to the rest of his shares which shows the confidence he has in the future growth in the company.

Other insiders have also sold shares during the secondary offering and IPO lockup expiry. However, much of this selling activity could be attributed to profit-taking rather than a negative outlook, with the share price up over 200% compared to its initial IPO price of $25. Now that shares are a little lower in price, it will be important to see whether insiders continue to sell. 

Strategic partnerships will grow long term demand

One of the biggest questions for newer companies, especially those that operate in somewhat niche markets, is can they continue to grow demand and revenue? 

While the alternative meat industry is a niche market in itself, it also is a part of the larger meat market. With huge companies like Tyson (NYSE:TSN) and Kellogg's (NYSE:K) MorningStar Farms already operating in the sector, it might be harder for Beyond Meat to compete at a retail level.

Even now, these companies have meatless products that are biting into Beyond Meat's profit margins. So can Beyond Meat increase product demand and brand value?

Thankfully, Beyond Meat has stepped up to the plate and presented a plan for increasing product demand. First, the company is looking to lower the cost of its plant-based meat alternative. The result should be a reduction in the difference in price between traditional meat and Beyond Meat's meatless alternative. These lower costs will place some strain on the company's long term profitability. 

However, lowering costs are not the only way Beyond Meat will increase sales and demand. Beyond Meat is also partnering with brand name restaurants such as Mcdonald's, Dunkin, KFC, and Subway. These partnerships will bring not only new customers but also larger orders that should happen on a more regular basis.

And if everything goes right, Beyond Meat could lock in lucrative long term restaurant partnerships. Impossible Foods, another alternative meat company, already has a partnership with fast-food giant Burger King. And based on customer reviews of the Impossible Whopper, it would appear that customers are happy with the meat alternative. So if Beyond Meat can get the same type of customer reaction to its products in large chain stores, sales of Beyond Meat products could skyrocket.

Beyond Meat's future is bright

Based on the first three quarters of results as a public company, Beyond Meat could have a very bright future. The company has a great group of executives that have a track record of effectively growing the company's product line and brand image. But to become great, Beyond Meet will need to continue to sustain profits and grow demand as the competition begins to heat up. 

There is one final piece of important information about Beyond Meat. Since its IPO in May the share price has been somewhat volatile. Volatility is expected to diminish, as all available shares from the IPO are now on the market. This means the share price will have a chance to appreciate at a much more natural pace.

Whether you believe in the meat-free revolution or not, the numbers show that it's here to stay, and Beyond Meat could be a good investment as a result.