4 stocks to bite into

These companies have a head start on the plant-based meat alternatives market, which we project will grow to US$48 billion by 2029

Vikram Barhat 8 January, 2020 | 12:30AM
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Mixed food on a barbecue grill
Going meatless, either through vegan or plant-based food, is a big trend, and it just found the biggest platform from which to announce its arrival.  The 77th annual edition of the Golden Globes last Sunday will be remembered as much for the host Ricky Gervais’ savage monologue as for its menu featuring 100% plant-based meal.

As more consumers opt for meat alternatives -- driven by concerns and care for health, animal welfare and the environment – food companies are rolling out their meatless meal offerings as substitutes for a wide variety of animal-derived products. These companies, and their bottom lines, are getting tremendous support from consumers, which now include large chains of quick-service restaurants. Plant-based substitutes have also got a ringing endorsement from celebrities including Leonardo DiCaprio, Bill Gates, Jay Z, Serena Williams, and Katy Perry, who have put their money where their mouth is by personally investing in non-meat startups.

For long-term investors, regardless of their dietary preferences, this represents a brand-new investment opportunity. While more companies are expected to join the plant-based food bandwagon, these companies have a head start and are expected to control much of the plant-based meat alternatives market, which Morningstar projects will grow from US$5 billion in 2018 to US$48 billion by 2029.

Beyond Meat Inc
Ticker BYND
Current yield:  
Forward P/E: 285.71
Price US$75.47
Fair value: US$62
Value 22% premium
Moat None
Moat Trend Positive
Star rating **

Data as of Jan 03, 2020

A pioneer in plant-based meats, or PBMs, Beyond Meat (BYND) offers burgers (70% of sales), ground beef, sausage, and chicken that replicate the look, cook, and taste of meat. Its products are widely available at retailers, college campuses and fast-food restaurants across the U.S., Canada, and parts of Europe, Asia and Latin America.

Beyond Meat is in hyper-growth mode as the global PBM market continues to skyrocket, “driven by the 20% of the population willing to adjust their daily habits in order to benefit the environment,” says a Morningstar equity report.

Beyond Meat is well positioned to benefit as PBMs continue to poach on the larger market for animal-derived foods. Beyond’s brand continues to win with consumers, given its strong performance in taste tests and ongoing R&D investments,” says Morningstar equity analyst, Rebecca Scheuneman, who projects the company’s PBM market share to increase from 1.9% in 2018 to 6.5% in 2028. It is projected to clock triple-digit revenue growth in 2019 and 2020, led by additional retail distribution and restaurant deals, particularly “a deal to supply North American McDonald’s restaurants in 2020, which we expect to add US$400 million in annual revenue,” says Scheuneman, who pegs the stock’s fair value at US$62. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Beyond Meat Inc67.05 USD1.19Rating
Conagra Brands Inc31.17 USD2.35Rating
Nestle SA128.44 USD0.68
The Hain Celestial Group Inc38.90 USD1.24Rating

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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