Which company between Oatly and Beyond Meat is better positioned to take advantage of the global shift towards plant-based meat consumption?
Dec. 10, 2021
Companies operating in the alternative meat or plant-based food segments may offer investors the opportunity to generate stellar returns in the upcoming decade. These companies are part of rapidly expanding markets, making stocks such as Oatly (NASDAQ: OTLY) and Beyond Meat (NASDAQ: BYND) top bets right now.
Let's see which between the two is a better investment at current prices.
Oatly: Bull vs. Bear arguments
A company that recently went public, Oatly is valued at a market cap of $5.2 billion. The Oatly IPO was priced at $17 per share, and the stock touched a record high of $29 this June before losing significant momentum to trade currently at $8.80.
A Swedish company, Oatly provides a wide variety of plant-based dairy products. In Sweden, Oatly accounts for 72% of the milk alternatives market, which falls to just 4% in the U.S. However, oat milk is rising in popularity and is forecast to grow at an annual rate of 10% between 2020 and 2017. Last year, the global oat milk market was valued at $3.7 billion.
Oatly's sales more than doubled from $204 million in 2019 to $421 million in 2020. Wall Street forecasts sales to rise to $638 million in 2021 and $1.03 billion in 2022. So, OTLY stock is valued at a forward price to 2022 sales multiple of less than 5x, which is quite reasonable.
Alternatively, Oatly is still reporting an operating loss. In the last 12-months, its operating loss widened to $150.7 million, compared to a loss of $47 million in 2020. The company expects profit margins to improve as it expands production capacities by entering international markets and benefit from economies of scale.
Beyond Meat: Bull vs. Bear arguments
Beyond Meat, one of the largest players in the plant-based meat verticals, commands a market cap of $4.7 billion. It aims to lower meat consumption at the global level by expanding its portfolio of food products over time.
Beyond Meat products are not only available at retail stores, but it has also collaborated with fast-food chains, including Restaurant Brands International, Starbucks, and McDonald's.
These partnerships allowed Beyond Meat to increase sales from just $32.5 million in 2017 to $406.7 million in 2020. Wall Street expects sales to touch $465 million this year and $619.5 million in 2022.
The company went public in mid-2019 at $25 per share and touched a record high of $235 in July that year. BYND stock is now down 68% from all-time highs. Its recent decline can be attributed to a tepid performance in Q3 of 2021, where Beyond Meat reported a loss of $0.87 per share and revenue of $106.4 million. Comparatively, analysts forecast the company to report revenue of $109.2 million and a loss of $0.39 per share.
So, which stock is a better buy right now?
Beyond Meat and Oatly continue to grow top-line at a stellar pace but are also expected to remain unprofitable in the near future. But Oatly is trading 100% below average price target estimates while Beyond Meat stock is trading close to consensus estimates.
Right now, Oatly's higher growth estimates and a lower valuation compared to BYND make it a better stock.
