Here's Why Beyond Meat Rose Nearly 10% Today
What happened
Shares of Beyond Meat (NASDAQ: BYND) rose almost 10% today after the company announced it had entered a partnership with Zandbergen World's Finest Meat to build a new manufacturing facility in the Netherlands. It will be its first production plant outside of the United States, will be constructed by Zandbergen, and is expected to come on line in the first quarter of 2020.
The pair already had a distribution deal in Europe, but the new facility will help to reduce transportation and logistics costs on the continent. That figures to catalyze growth for Beyond Meat in an important global market. As of 1:32 p.m. EDT, the stock had settled to a 8.3% gain.
So what
Beyond Meat has soared since its initial public offering (IPO). Though recent volatility suggests investors have begun to question whether the animal-free protein developer is worth its hefty market cap, today's news has catapulted the business to a nearly $5 billion valuation. It probably won't be sustainable in the near term.
While wielding a dedicated manufacturing facility in Europe will help to increase the efficiency of operations and could provide a significant boost to Beyond Meat's quest for profitability (the business is already on a promising trajectory), it will take time for the facility to ramp up operations once it comes on line in early 2020. A simpler critique would note that a market cap of $5 billion values shares at over 56 times sales and seven times enterprise value.
Now what
Today's news is another step in the right direction for Beyond Meat and one that should be welcomed by investors with a long-term mind-set. That said, given the lofty market valuation, Wall Street's enthusiasm might recede once more animal-free protein products hit the market. While the business has a significant growth opportunity ahead of it, there's no denying a lot of future growth is currently priced into shares.
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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.