Give credit where it's due. Many people want to live healthier lives by eating less meat. A Gallup poll indicated that nearly one-fourth of U.S. consumers ate less meat in 2019 than in 2018. Beyond Meat (NASDAQ:BYND) is tapping into the resulting opportunity with a plant-based alternative that allows consumers to enjoy the benefits of that choice without giving up the taste and texture of meat.

Despite challenges linked to the pandemic, the company's top line is on pace to grow 38% in 2020. On average, analysts expect growth to accelerate to around 50% this year. That may allow Beyond Meat to turn profitable in 2021.

When all is said and done, though, Beyond Meat is too risky for most investors. A much more reliable -- if boring -- name like Walmart (NYSE:WMT) is the better pick for most people.

Two people holding arrows pointing in opposite directions.

Image source: Getty Images.

Naysayers surfacing for good reason

Beyond Meat stock has fallen 32% since peaking last October but sits 441% above its 2019 IPO price of $25 per share. Beyond Meat remains unprofitable, but big profits are on the way to justify investing now, right?

Maybe. But not everyone agrees that the company will continue growing at its recent pace.

For example, Piper Sandler analyst Michael Lavery recently downgraded Beyond Meat from overweight to neutral and lowered his price target from $144 to $125. He argues that demand may not live up to investors' lofty expectations in 2021...a worry prompted by the company's disappointing third-quarter sales. Beyond Meat's top line of $94.4 million for that period fell well short of the average analyst estimate of $132.8 million.

Lavery also noted that rival Impossible Foods' recent price cut may point to stiffening competition within the plant-based meat market. That worry echoes similar sentiments served up by Bernstein analysts in October and Citi analysts in July.

These analysts could still be underestimating the growth of competition in plant-based meat. The world's largest meat company, JBS, stepped into the meatless-meat market last year with new brands OZO and Planterra. Food giant Tyson Foods has also entered the fray. Just last week, it co-launched a meatless shrimp product with New Wave Foods. Cargill moved into the space a year ago, and even Kroger now offers private label plant-based beef and chicken options in many of its stores. 

Connect the dots. Competitors are coming. The stock trades at a forward price-to-earnings (P/E) ratio of nearly 700 and at roughly 20 times its trailing sales (eight times the S&P 500's price-to-sales ratio of 2.43), suggesting that the market doesn't see it yet or doesn't think those newcomers matter. That sort of hubris can punish unsuspecting investors, though. Just ask former shareholders of Sun Microsystems, Yahoo!, and MySpace (among others). 

Walmart is deepening its already-deep roots

Of course, Walmart also faces competition. It's just not facing new or unexpected competition that investors are underestimating or outright ignoring. If anything, the market is underestimating Walmart's potential to gain market share.

First, the retailer has entered the primary healthcare arena. It currently operates six surprisingly robust stand-alone health clinics -- with more on the way -- offering patients services ranging from dentistry to X-rays to counseling, and more. Walmart also began selling health insurance last year.

Entering the healthcare market is a brilliant (if unorthodox) maneuver for Walmart. Affordable healthcare consistently rates as one of American consumers' chief worries. With 140 million weekly U.S. visitors (in-store and online), Walmart has a huge base of prospects for its healthcare offerings.

The company also recently launched Walmart+ to compete with Amazon Prime. Walmart+ offers unlimited free delivery of online orders at a flat monthly or annual rate. It is rolling out new in-store signage that encourages shoppers to use their smartphones as a virtual shopping assistant of sorts. Walmart is also working with e-commerce service provider Shopify to broaden the product reach of Walmart.com. And of course, it has become the king of the country's curbside pickup movement. Research firms Incisiv and Mercatus estimate e-grocery revenue is on pace to double between now and 2025. With 5,000-plus stores in the U.S. alone, the retailer is well positioned to capture more than its fair share of this shift. Walmart is even becoming more like a bank as it diversifies.

Walmart's initiatives add up to more than the sum of the parts. Once Walmart draws people into its holistic ecosystem, consumers are prone to simply punt to the company as other headaches of life materialize. That could enable it to grow faster than analysts anticipate.

Walmart (WMT) is expected to produce slow and steady sales and earnings growth, but analysts may be underestimating what's to come.

Data source: Thomson Reuters. Chart by author.

A clear choice

Beyond Meat may well turn profitable this year. Its shares could indeed climb higher in the foreseeable future. Compared to Walmart, which is likely to grow revenue about 4% annually going forward, Beyond Meat certainly has a far more scintillating story.

However, Beyond Meat is still just a tricky, speculative trade that may be living on borrowed time. Analysts collectively rate the stock as a hold, and the consensus price target of $115.94 is well below the stock's Wednesday closing price of $135.21.

By contrast, Walmart's dominant position in brick-and-mortar retail makes it a far more appropriate risk-adjusted pick for most investors. Investors can participate in its success at a perfectly reasonable price of around 25 times this year's projected earnings.