What happened
Shares of Oatly Group (OTLY 2.65%) soared as much as 12% on Tuesday. There was no news from the company, so it looks like the stock is just bouncing along with the broad market recovery in small-cap growth stocks. As of 11:46 a.m. ET, the stock is up 10%.
So what
Oatly shareholders are enjoying the bounce in high growth stocks this morning. The NASDAQ-100 Index is up 2.88% as of this writing, and the small-cap growth factor is up a whopping 3.8%. This general tailwind is likely what helped Oatly's shares go up so much today.
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Oatly is a plant-based food company that sells oat milk and other oat-based products. In the third quarter of this year, the company grew revenue 49% year over year to $171 million. This might seem impressive, but investors should look at the sharp operating losses the company has. In that same quarter, Oatly's operating loss was $44 million, which it will need to turn around soon in order to create a viable company.
Now what
The market has not been kind to unprofitable companies the last few months. Even with today's recovery, Oatly stock is down over 50% since its initial public offering in the spring. With a market cap of $5.2 billion, the stock has a price-to-sales ratio of 9. With low gross margins and heavy operating losses, this still seems expensive. Unless you believe Oatly can grow its sales rapidly for the next few years and beyond and reach profitability, it is probably best to stay away from the stock right now.
