Here's a shocking bit of information: If you'd invested in shares of Beyond Meat (BYND 2.00%), the maker of plant-based "meat" products, when it debuted on the market in 2019, you'd have lost 98% of your investment as of Nov. 18. Yikes.
That kind of plunge can make the stock seem attractively valued to some naive investors, with its recent price-to-sales ratio of 0.25, well below its five-year average of 1.5. But that's a "value trap" -- a situation where a stock looks much more attractive than it really is.
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A truly attractive company would typically have growing revenue and earnings. Beyond Meat's most recent quarterly earnings report featured revenue down 13% year over year and gross profit down nearly 18%. The net loss (not net profit) was $111 million, worse than the year-earlier loss of $27 million.
NASDAQ: BYND
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CEO Ethan Brown said that "we are taking equally strong measures to accelerate our path to sustainable operations, including pursuing further and sizable cost reductions, gross margin expansion investments and targeted strategic growth initiatives." If a company is working toward having sustainable operations, that's cause for concern. And if it's doing so by cutting costs, that can be good, but it can also mean that it's cutting bone along with fat -- thereby potentially diminishing its ability to grow. Remember that the low valuations on many stocks are there for good reason.
Meanwhile, shares are actually up some 51% over the past month (as of Nov. 19), which is giving some investors hope. But my colleague Adam Spatacco (like others) has suggested that it's due to Beyond Meat becoming a "meme stock," popular with speculative traders, rather than long-term investors. In other words, the jump in price may be (to use a crude investing term) a "dead cat bounce."
And with its share price recently below $1, Beyond Meat is now firmly in penny stock territory -- the land of risky stocks, many of which will perish. Consider some promising growth stocks instead.
