Plant-based meat products have become mainstream in recent years with Beyond Meat (BYND 0.95%) becoming an early leader in an industry Bloomberg Intelligence once projected could be worth more than $162 billion by 2030 (up from just $29 billion in 2020). The company has come out with plant-based patties, sausages, nuggets, and "chicken" tenders. But despite the widening availability of these meat substitutes, shares of Beyond Meat haven't won over investors.
Since going public at $25 per share in 2019, the stock is down about 60%. From its peak a few months after the IPO, the stock has plummeted over 95%. But recently, investors have become more bullish with shares of Beyond Meat up 50% in just the past month. Has this beaten-down stock finally won value investors over?
Beyond Meat is a highly volatile stock
One thing investors should be aware of when evaluating Beyond Meat is that there's a lot of volatility that comes with this stock. Beta is a measure of how closely a stock follows the broad market, with a beta value of 1 indicating that it moves in unison with the market. But Beyond Meat stock has a beta of nearly 2.3, indicating that its swings in value are much more drastic.
And over the past several weeks, the stock's average trading volumes have been rising sharply.
Data by YCharts.
What compounds this risk is that Beyond Meat is also a heavily shorted stock with many investors actively betting against it. This means there's also the possibility of a short squeeze should the stock abruptly rise in value. That may explain some of the activity over the past month as there are no other clear catalysts that would explain such a huge jump in the share price.
Beyond Meat's fundamentals remain concerning
Regardless of the short-term gains, investors should always consider a company's fundamentals before deciding whether to invest in a stock. While price movement may indicate a positive trend, it may not be sustainable if the underlying business isn't in good shape.
The one number that investors should pay close attention to is Beyond Meat's gross profit margin. That's because it has often been negative. And even when that hasn't been the case, it has remained in the single-digit percentage range. A negative gross profit margin means the business isn't selling its products for enough money to cover its cost of goods sold. Without a higher gross margin, Beyond Meat is never going to stay out of the red, even if its growth improves.
Over the past four quarters, the company has incurred a net loss of $249.9 million on revenue totaling $349.6 million.
Data by YCharts.
The stock's recent rally could be short-lived
There isn't anything to suggest this recent rally is due to anything but speculation. And if that's the case, there's little reason to expect it will continue, or worse, that the stock won't end up giving back these gains in the near future.
While Beyond Meat remains a top brand in its industry, investors are better off avoiding the stock for now as there's little in its financial and operational outlook to overcome the accompanying volatility and risk. There are better food stocks for investors to consider than Beyond Meat.
