The COVID-19 pandemic has reset some core investor expectations in the meat industry. Supply chain problems at processing plants are giving companies like Beyond Meat (NASDAQ:BYND) an extra opening to market their plant-based products. But that optimism has made the stock one of the most expensive ones on the market.

Below, we'll take a look at whether an investor might prefer buying Wendy's (NASDAQ:WEN), an established business with a time-tested business, over the popular meat substitute producer.

A woman shops in the meat section of a supermarket.

Image source: Getty Images.

Beyond Meat is a growth stock

The undeniable reason to like Beyond Meat's business today is its operating trajectory. Sales jumped 141% in the fiscal first quarter and have increased at a compound annual growth rate of more than 200% since 2017. The company is finding success both in its retail segment, which serves supermarket chains, and in its food service division, which markets to restaurants.

Wendy's isn't even in the same ballpark. The fast-food giant's revenue dipped slightly in the first quarter and increased only 8% in 2019. That result, which trailed rivals like McDonald's, helps illustrate the mature and competitive nature of this industry niche. Wendy's growth metrics are likely to be even worse over the next few quarters as they'll reflect the impact of COVID-19 more directly.

Beyond Meat is also showing promising profitability trends, with gross profit margin jumping to 39% of sales in the latest quarter from 27% a year ago. That success allowed the company to post positive earnings to start 2020 after enduring losses in each of the last three fiscal years.

Wendy's is the stronger business

While it is struggling with weak selling conditions today, Wendy's has far more of the type of assets that tend to produce solid long-term stock returns. It has a robust and diverse business model, for example, which generates predictable cash flow from recurring sources such as franchise royalty fees and rental income. Beyond Meat gets nearly two-thirds of its sales from a single product, the Beyond Burger.

The Wendy's brand is more established, with significant market share in an industry that consumers have supported for decades. Beyond Meat, on the other hand, accounts for an immaterial portion of the broader meat industry. Its plant-based substitute niche could change radically over the next few years, too, and in ways that don't benefit first movers like Beyond Meat and Impossible Foods.

Finally, Wendy's wins the matchup with respect to financial strength. It booked $1.7 billion of sales last year, and its annual operating profit of $262 million was just slightly below the $298 million that Beyond Meat booked in total revenue.

Prices and choices

That earnings difference shows just how much more investors are expecting from Beyond Meat than from Wendy's, or almost any other stock on the market. The meat substitute specialist is valued at $8.4 billion right now, or about 27 times sales. Wendy's market cap is $4.4 billion, or less than 3 times the past year's revenue.

That insane valuation gap will surely close as Beyond Meat delivers some of the market-thumping growth that Wall Street is expecting over the next few years. And an investor who wants to participate in the shift away from traditional beef, pork, and chicken products might prefer owning the stock.

But if you prize predictable growth, financial flexibility, and an excellent track record, you're better off avoiding a Beyond Meat investment and buying Wendy's or one of its consumer staples rivals instead.