Beyond Meat, the once high-flying growth stock, is now a cautionary tale.
The company has failed to expand its market opportunity and is a risky proposition going forward.
Just a few years ago, the demand for plant-based meat products was exploding with the brands serving this market enjoying impressive growth. A first mover in this space was Beyond Meat (NASDAQ: BYND), which debuted on the stock market in May 2019 at $25 per share only to surge to nearly $67 on its first day of trading.
By November of the following year, the stock had doubled to more than $140 per share. Unfortunately, if you'd invested $100 in Beyond Meat at that time, you'd be sitting on a position worth ... $0.72 as of this writing. You'd have lost more than 99% of your investment over the past five years. Yikes!
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What happened with Beyond Meat? A glance at its latest earnings report offers some insight: Revenue declined 13% year over year to $70.2 million, and its gross margin shrank 7.4 percentage points to 10.3%. Its net loss was $110.7 million. Excluding non-cash impairment charges and other one-off items, the company still saw a net loss of $29.5 million. Put simply, the company is not firing on all cylinders -- or perhaps any cylinders.
As Motley Fool contributor Timothy Green recently pointed out, the company continues to suffer from soft demand for its products, and in the face of rising competition, it hasn't been able to make its products stand out enough to warrant premium prices.
With shares down 73% year to date, you may be wondering if the stock is now undervalued, making it a good buy. Its price-to-sales ratio is just 0.26, after all. However, low valuation multiples don't always point to bargains. In this case, Beyond Meat looks more like a value trap than a value play.
So if you find yourself with heavy losses in Beyond Meat, there are few signs a successful turnaround is taking shape. You may be better off taking the loss this year and putting what money you have remaining in a truly exciting and promising stock.
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool has a disclosure policy.