Plant-based stocks have attracted significant investor interest in the past year.
Data released by The Good Food Institute reveals that $3.1 billion in investment capital went into alternative proteins globally in 2020. That amount was three times the capital raised in 2019.
In addition, Meticulous Research suggests the plant-based market will grow at a compounded annual growth rate of 11.9% over the next six years, surpassing $74 billion by 2027.
Due to the growth in demand, many companies in the alternative protein space are revising strategies to increase operations. Therefore, investing in plant-based stocks is transforming into a high-growth opportunity that Wall Street cannot afford to overlook.
For instance, Beyond Meat (NASDAQ:BYND), which is down about 20% in the past year, has been on investors’ radar since it went public in May 2019 at an opening price of $46. By July the same year, BYND stock saw a record high of $239.71. Now, shares are around $85. The Street is also expecting Impossible Foods to go public in the near future. Therefore, the competition is likely to heat up further.
The emerging plant-based foods companies that appeal especially to younger consumers are poised to disrupt established trends in the food industry. Research by Aramark (NYSE:ARMK), which provides food and facilities to numerous industries, suggests that health-conscious consumers are shifting their eating habits toward more “plant-forward” foods.
Accordingly, members of Generation Z, or the generation born between 1997-2012, find plant-forward eating appealing, while over three-quarters could go meatless, up to several times a week. Hence, it’s no surprise that Foresight 2021 report has selected alternative proteins among its picks for technological innovations forecast to have the most significant impact on global markets over the next decade.
Numerous critical factors could boost the performance of plant-based stocks, including healthy eating trends, growing concerns for the environment, as well as technological innovations. With that information, here is a list of three plant-based stocks that look destined to gain traction in 2022 and beyond:
Plant-Based Stocks: Calavo Growers (CVGW)
52-week range: $33.25 – $85.40
Dividend yield: 2.7%
Santa Paola, California-based Calavo Growers is one of the largest producers of avocados in North America. The company sells avocados to supermarket chains, wholesalers, foodservice providers, as well as other distributors.
Calavo Growers announced Q3 results in early September. Revenue increased 5% year-over-year from a year ago to $285 million. Adjusted net loss came in at $3 million, or 17 cents per diluted share, compared to an adjusted net income of $12.9 million, or 73 cents per share, in the prior-year quarter. Cash and equivalents ended the period at $1.3 million.
On the results, CEO Steven Hollister said, “Our results for the third quarter of this year were adversely impacted by inflationary pressures on labor, raw materials and freight, all of which accelerated as the third quarter progressed.”
Global demand for avocados is forecast to grow at a compound annual growth rate of 5.6% between 2020 to 2026. As it takes longer than 10 years to grow a new avocado tree, Calavo is positioned for long-term growth. In addition, the grower has extended its products to include fresh-cut fruits and veggies, addressing the growing demand for healthy food.
This is expected to mark the tenth consecutive year of dividend increases. CVGW stock currently offers a dividend yield of 2.7%.
Despite its strong fundamentals, shares have declined by 50% since its high in early March. The stock is near $42, down 39% so far this year. The pullback over the past six months offers an opportunity to buy CVGW stock at a bargain price. It is trading at 33x forward earnings and 0.75x trailing sales.
Ingredion (INGR)
52-week range: $70.69 – $99.21
Dividend yield: 2.6%
Westchester, Illinois-based Ingredion is a producer of ingredients for the food, beverage, and personal care industries. The company specializes in starches and sweeteners, such as potato starch and high fructose corn syrup. Starches account for around 45% of INGR’s revenue, followed by sweeteners with 35%.
Ingredion announced Q3 results on Nov. 2. Revenue soared 17% from a year ago to $1.76 billion. Net income came in at $118 million, or $1.75 per diluted share, up from $92 million, or $1.36 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $434 million.
After the announcement, CEO Jim Zallie said, “We delivered outstanding top-line performance of 17% net sales growth in the quarter resulting from well managed sales execution to fulfill strong customer demand.”
The company should benefit from long-term consumer trends for plant-based alternative meats and non-calorically sweetened beverages. These specialty ingredients currently account for a third of total sales. Its PureCircle acquisition allowed INGR to move into these higher-growth categories.
INGR stock offers a 2.6% dividend yield. A payout increase this year is expected to mark the 11th year in a streak of dividend hikes.
Shares hit a 52-week high of $99 on Nov. 8. It’s up 25% in 2021. Despite currently near its peak value, INGR stock has a reasonable valuation compared to its peers. It is trading at 13.3x forward earnings and 1x trailing sales. Future quarters could see the company create more further shareholder value.
Plant-Based Stocks: United Natural Foods (UNFI)
52-week range: $14.55 – $52.35
Rhode Island-based United Natural Foods is a wholesale distributor of natural, organic, and specialty foods across North America. The product range comprises categories such as grocery and general merchandise, produce, perishables, and frozen foods.
United Natural released Q4 results in late September. Revenue fell 0.5% from a year ago to $6.74 billion, but it was up almost 8% compared to two years ago. Full-year fiscal 2021 revenue came in at $27 billion, up by 26% from fiscal 2019. Adjusted earnings per share in the quarter increased 11% to $1.18, beating the analyst consensus at 80 cents. Cash and equivalents ended the period at $41 million.
On the metrics, CEO Sandy Douglas said, “I see significant opportunity to accelerate the value we create with and for our customers as well as the opportunity to make our operations more effective and efficient, both leading to continued profitable growth within our estimated $140 billion addressable market.”
The pandemic-induced surge in food sales has waned over the past several months. But top-line growth still maintains momentum. Management anticipates 4% growth in adjusted earnings per share of $3.90 to $4.20.
UNFI stock trades just over $51 and gained 215% so far this year. But shares look cheap, trading at just 12.3x forward earnings and 0.1x trailing sales.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.