In business, it's often said you are either growing or dying. And this idiom seems to be playing out for Beyond Meat (BYND -0.42%). Shares in the plant-based meat producer have collapsed 61% in the last 12 months as the company's growth story turns in reverse. The downside looks likely to continue because of its astronomical cash burn. 

What went wrong with Beyond Meat?

Founded in 2009 and going public a decade later, Beyond Meat is a plant-based meat provider that aims to "create nutritious plant-based meats that taste delicious and deliver a consumer experience indistinguishable from that provided by animal-based meats." For investors, the underlying assumption may have been that as a well-capitalized public company, its R&D budget could help it succeed where all others failed. But while this may have sounded good in theory, it has fallen flat in practice. 

While taste is subjective, I personally do not see Beyond Meat's products as reasonable imitations of real meat in taste or smell. Further, the company's products are not well differentiated from its biggest rival, Impossible Foods, or the more than 60 other plant-based meat companies with over $500,000 in sales, according to data from The Washington Post

These artificial meat products are also not necessarily healthy. According to Harvard University, they are high in saturated fat and sodium, which are associated with heart disease. 

The growth story is over 

Beyond Meat's fourth-quarter earnings highlight its perilous position. Net revenue tanked 21% year over year to $79.9 million due to a contraction in both its U.S. and international businesses. The company has sought to remain relevant by releasing new products, such as its Beyond Meat steak, launched at Kroger and Walmart nationwide in October. But so far, these efforts have been unable to rescue its flagging sales.

Red arrow pointing downward

Image source: Getty Images.

The bottom line is also in shambles. Operating losses stood at $65.7 million in the quarter, with the biggest outflow being selling, general, and administrative expenses. Management is seeking to address these problems through workforce reductions, laying off 19% of its employees in late 2022. And by the second half of 2023, it expects to return to cash flow-positive operations. But this looks unreasonably optimistic. 

With a gross loss of $2.9 million, it currently costs Beyond Meat more to produce and distribute its meat products than it earns from actually selling them, so the company may need to take drastic actions to meet guidance. 

Beyond Meat is a sell 

Despite its laundry list of problems, Beyond Meat boasts a price-to-sales multiple of 2.6, which is higher than the S&P 500 average of 2.3. Shares still retain a slight growth stock premium despite declining sales and unsustainable losses. And this doesn't look justified. 

The imitation meat industry has failed to live up to its lofty expectations. And Beyond Meat's products have not established an economic moat against the massive competition. Investors should avoid the stock because of the high likelihood of continued downside over the long term.