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Is Beyond Meat’s High Valuation Multiple Justified?

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Jun. 10 2019, Published 9:45 a.m. ET

BYND’s valuation

Beyond Meat (BYND) is still in the growth phase of its business cycle. During this period, the company’s expenses will be on the higher side, so its earnings can’t be considered for its valuation. We’ve instead opted to consider the company’s EV-to-sales (enterprise value-to-sales) multiple for our analysis. The surge in Beyond Meat’s stock price since its listing on May 2 has raised its valuation multiple.

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On May 7, the company was trading at a forward EV-to-sales multiple of 29.69x. On the same day, its peers Tyson Foods (TSN), Conagra Brands (CAG), General Mills (GIS), the J.M. Smucker Company (SJM), and Mondelēz International (MDLZ) were trading at forward EV-to-sales multiples of 0.95x, 2.33x, 2.69x, 2.53x, and 3.64x, respectively.

With Beyond Meat penetrating only 2% of US households and just 7% of its 2018 revenue coming from international markets, the company has a huge scope for expansion. With its plant-based innovations, BYND is positioning itself to compete against a $1.4 trillion global meat industry, which is valued highly by investors, allowing it to trade at a higher valuation multiple.

Analysts’ recommendations

Since BYND reported its first-quarter earnings results, JPMorgan Chase, Jefferies, and Credit Suisse have all raised their price targets. JPMorgan Chase has raised its price target from $97 to $120, Jefferies from $85 to $105, and Credit Suisse from $70 to $125.

Of the eight analysts that are following Beyond Meat, 25% are in favor of a “buy” ratings, with the remaining 75% recommending “holds.” No analysts have given it “sell” ratings. On average, analysts have given BYND a 12-month price target of $100.83, which represents a fall of 27.3% from its current price of $138.65.

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