Los Angeles-based Beyond Meat sells plant-based meats. With the company’s revolutionary food, clients can eat meat that tastes like animal-based meat, but contains the nutritional benefits of eating plant-based food.
The company was founded in 2009 and incorporated in Delaware. The underwriters of the IPO are Goldman Sachs, J.P. Morgan, Merrill Lynch, Jefferies, and William Blair & Company.
With 355 employees, 28,000 points of distribution and supplying to big restaurant chains like TGI Fridays, the company does not seem a new start-up, but a consolidated mid-cap company. In addition, its business seems to be growing at high pace. In the nine months ended September, 29, 2018, BYND released 167% revenue growth amounting to $56.42 million in revenues and gross profit of $9.7 million. Growth investors will appreciate the company because its revenue is growing at a high pace and its gross profit margins are also increasing.
On the contrary, value investors may not appreciate BYND as the company reported negative net income in 2016 and 2017, equal to -$25 million and -$30 million respectively. In addition, its cash flow from operations was also negative, equal to -$23 and -$25 million. The investors assessing the company with a DCF model may have to assume that the upward trend in the net income and gross profit margin could continue. It is very difficult to determine that it will be the case of BYND.
The company’s financial situation seems very fine with cash of $49 million in September 2018 and only $30 million in total liabilities. The financial debt does not seem very significant, equal to $19 million. Investors should not worry about the preferred stock, equal to $25 million in September. The company expects to convert these convertible securities as the IPO goes live. As of today, the CFO is negative, so BYND may need further capital in the future. If the company sells further equity to finance its operations, the stock price could decline. With this in mind, the total amount of cash in the balance sheet seems the most relevant feature to assess once the IPO goes live.
Tyson Foods owns 6.6% stake in the company, which will please most investors. Other institutional investors also acquired shares of the company and no shareholder owns a stake larger than 50%. Directors own 27.7% in the company. With these numbers in mind, investors should expect an independent Board of Directors.
The company will use the proceeds from the IPO to finance its sales efforts, its manufacturing facilities, and research and development. Additionally, the prospectus notes that BYND is ready to acquire other businesses. It seems beneficial that BYND will not use the proceeds to pay debt obligations.
Disclosure: We hold no position in BYND either long or short and we have not been compensated for this article.