BYND - More Downside Around The Corner?

Almost a month ago I stated my reasons as to why I think BYND was going to fall. At the time of writing, we have seen almost a 35% fall in their share price, and short sellers are cashing in.

Despite an upbeat Q3 earnings report from the company, it did not seem to be enough to convince investors to pay for the stock. Earlier this week we saw the lock-off period expire (this is when insiders who have held the stock post-IPO can sell their holdings), and the result was an almost 5% fall in their share price in after hours trading. Further to that we saw a board member, Greg Bohlen, leave the company who owns a 1% stake in the company. We might expect him to sell his position and therefore anticipate BYND going down further. However, I don't see that being likely as we know that it was an amicable decision, yet investors did not see that as a reason to sell at that time.

I'd set a price range of around the $75 - $80 range for BYND in the next couple of months.

Q3 Earnings are strong, but these signals show the same pattern for growth stocks - they finally burst

Looking at their Q3 earnings report, we can see that the company does have strong financials. Despite not earning positive net income yet, they are slowly making their way towards it. Their position improved from around $9 million to $4 million, and have anticipated this figure to be in the green no later than next year. Further, their balance sheet is quite impressive - they have around $300 million cash in hand, and with that they could do alot. Either re-invest all that back into their operating expenses to grow margins, or use that to make good contracts and productive investments rather than paying it back out as dividend.

Net revenues coming in at around $91 million, of which almost $33 million were gross profits. Compared to a year ago, this is an increase of almost 250%! This is certainly something that a mature company would like to show to impress stakeholders but the relatively new emergence of BYND is not going to have the same effect here. One reason I think this might be the case is that what would their financials look like in the near future? Much of their growth may already be priced in!

Take a time frame of around 1 year into the future, assuming that sales double in this time and they happen to get gross profits of $66 million. We can assume that no more shares were issued during this time (so 66 million outstanding) and operating expenses increasing to around $35 million (BYND expand globally with their retail lines) and little developments were made in their research and development. With these assumptions, in a year, their annualised profit would could be well over $100 million. Net incomes may improve in that time as well. The crux of the issue would be then to give it a suitable multiple value - could it be 25X or 50X? Food retailers don't trade at multiples as high as what BYND are forecast to get to. It would be yet another indication of an overvalued growth company with P/E ratios in those multiple ranges.

Interesting as the company is and their passion behind their ethos and delivery to plant-based alternatives, It seems as if the big giants may be better served at delivering this demand.

By Shamsher Mann

All sources and references were obtained from Seeking Alpha's BYND analysis page (Company fundamentals) and their Q3 report.