In the last few years, several companies have entered the plant-based meat vertical, and for good reason. According to a report from Research and Markets, the vegan food market is forecast to rise to $31.4 billion by 2026, up from $14.2 billion in 2018, indicating an annual growth rate of 10.5%.
An expanding addressable market makes vegan stocks such as Beyond Meat (BYND) and Oatly (OTLY) top bets for long-term investors. The ongoing pullback in these stocks may also provide you with an attractive buying opportunity.
While BYND stock is down61% in the past six months and OTLY stock has lost 62%. Let’s see which of these two stocks is currently the better investment.
Oatly
Oatly reported revenue of $171.1 million in Q3 of 2021, an increase of 49% year over year. A company that provides alternatives for dairy products, Oatly increased its produced finished goods volume to 131 million liters in Q3, up 77% compared to the year-ago period. However, analysts forecast sales of $186 million in Q3, dragging OTLY stock lower in following trading sessions.
Additionally, Oatly was impacted by higher production and shipping costs weighing on its bottom line. Its gross margin fell to 26.2% in Q3 compared to 31.3% in the year-ago period. Its net loss also expanded to $41.2 million, compared to a loss of $10.4 million in Q3 of 2020.
Due to COVID-19 related production and distribution challenges, Oatly had to cut its revenue forecast to $635 million for 2021, lower than its earlier forecast of $690 million.
Oatly is a Europe-based company and remains profitable in this region. However, its expansion efforts in the U.S. have dragged profit margins lower. But the company expects gross margins of 40% and EBITDA margins of 20% over the long term.
Beyond Meat
Beyond Meat partnered with several retail and restaurant chains in the last few years. However, due to the ongoing pandemic, these partnerships have not resulted in appreciable sales for the company.
While economies reopened in Q4, Beyond Meat sales fell by 1% to $100.7 million due to supply-chain disruptions and slowing demand. Its losses tripled to $77.7 million, compared to $24.5 million in the year-ago period.
Despite a tepid quarter, Beyond Meat has grown sales from $87.9 million in 2018 to $464 million in 2021, indicating annual growth rates of 74% in the last three years. However due to near-term headwinds and the increase in competition, BYND stock is likely to remain volatile in 2022.
The verdict
OTLY stock is valued at a market cap of $4 billion and analysts expect revenue to rise to $638 million in 2021 and $1 billion in 2022. Its loss per share might also narrow from $0.32 in 2021 to $0.27 in 2022.
Comparatively, BYND stock is valued at $3 billion by market cap and its sales are forecast to rise by 27.5% to $593 million in 2022. Its adjusted loss per share is also forecast to narrow from $2.87 in 2021 to $0.78 in 2023.
While both the companies are unprofitable, BYND stock is trading at a forward price to 2022 sales multiple of 5x and this ratio for OTLY stands at 4x. I believe Oatly’s higher gross margins, lower valuation, and better revenue forecasts make it a better stock compared to BYND right now.
BYND shares were trading at $46.90 per share on Wednesday morning, down $0.52 (-1.10%). Year-to-date, BYND has declined -28.02%, versus a -9.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
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