KeyStone’s Your Stock Our Take: Beyond Meat Inc. (BYND:NASDAQ) & Park Lawn Corporation (PLC:TSX) and Dog Millennial Esports Corp. (GAME:TSX-V).
This week in our Your Stock, Our Take segment we take a look at two unique stocks. The first has been all over the media and popping up at your local supermarket and a number of fast –food joints.
The company, Beyond Meat Inc. (BYND:NASDAQ), offers a portfolio of “revolutionary” plant-based meats. The stock IPO’d at the beginning of May on the NASDAQ at $25.00 per share and has rocketed over 55% to the $165 range. The growth is great and many think the burgers are delicious but with a market cap of roughly $10 billion, it the stock good value. A listener asks us our take.
Our second Your Stock, Our Take of this week is Park Lawn Corporation (PLC:TSX), which owns and operate businesses including cemeteries, crematoria, funeral homes, chapels, planning offices and a transfer service. There appears to be strong growth and a listener asks us if it offers value.
Finally, our Dog of the Week is, Millennial Esports Corp. (GAME:TSX-V), is a gaming and digital media company. Millennial provides turnkey global solutions that cover gaming technology and studios, event management, research and analytics, content production, and broadcasting. One year ago, the company’s shares traded at $2.33 and at its highs briefly reached $12.30. The stock dropped to $1.13 by the beginning of 2019 and saw its shares suspended until April. Today, the shares trade for $0.20. The 50% drop in the last week make it our Dog of the Week. Is the drop an opportunity or a sign of things to come? We will discuss.
KeyStone’s 2019 Canadian Dividend All Star Special Report – 4 new BUY Recommendations
About is Report
KeyStone’s 2019 Canadian Dividend Stock Report is a comprehensive analysis of the complete universe of dividend stocks in the Canadian market. We identified 352 dividend paying stocks listed in Canada and applied KeyStone’s rigorous criteria to find the company’s that provide the best value to investors. The report contains our top 8 current BUY recommendations which include 4 new BUYs (recommended as a result of this research) and 4 select BUY recommendations under existing coverage. The report also contains research (mini-reports) on 23 additional companies which we rate as possessing superior fundamentals relative the overall universe of Canadian dividend stocks (making up our ‘Top Tier’ monitor list).
BACKGROUND – Canadian Dividend Stock Universe
In total, there are 3,139 securities listed on the TSX and TSX Venture exchanges.
Out of this group, 763 securities pay a dividend or income distribution. After removing investment funds (such as ETFs), the universe of Canadian dividend stocks is reduced to about 352 individual companies. New companies are added to this list each year.
After conducting preliminary research on all 352 companies we narrowed the field down to 74 stocks which make up our basic monitor list. These are companies which we rate as possessing reasonably strong fundamentals with respect to financial performance, valuation and dividend sustainability. Digging deeper into the basic monitor list, we have highlighted 31 stocks in this report with overall superior fundamentals, including 8 current BUY recommendations.
As a teaser – one of the new recommendations provides a dividend yield of just under 6% plus strong growth potential.
The Top Tier Monitor List
This report contains research and analysis on 23 individual companies which make up our ‘Top Tier’ Monitor List. These companies stand apart from the overall universe of Canadian dividend stocks due to overall superior fundamentals (including growth, value, and sustainability of dividends). This is the group of companies that we will follow the most closely over the next several quarters. These companies are not current BUY recommendations; however, this is a vetted list of quality companies from which upcoming recommendations will likely be discovered.
Your Stock, Our Take
Beyond Meat has been on a meteoritic rise since its IPO – I tried their burgers at A&W – is there still an opportunity.
Charles R – Twitter
Beyond Meat Inc. (BYND:NASDAQ)
Current Price: $166.19
Market Cap: $10 billion
What does the company do?
Beyond Meat Inc. is a food company based in the United States. It offers a portfolio of revolutionary plant-based meats. The company has developed three core plant-based product platforms including beef, pork and poultry. Its flagship product is The Beyond Burger, is designed to look, cook and taste like traditional ground beef. It generates revenues primarily from sales of its products, including The Beyond Burger, Beyond Sausage, Beyond Chicken and other plant-based meat products. Its customers include mainstream grocery, mass merchandiser and natural retailers, as well as restaurants and other foodservice outlets mainly in the United States.
Key Points:
At the beginning of May 2019, Beyond Meat had its IPO on the NASDAQ at $25.00 per share.
By May 2nd, it was trading on the NASDAQ at $66.75.
The stock peaked on June 17th at $169.96 and is currently in the $165 range.
Recent Quarterly Financials:
- Revenue for the first quarter ended March 30, 2018 was $40.2 million, an increase of 215% over the prior year period.
- Net loss grew to $6.6 million in the first quarter of 2019, compared to net loss of 5.7 million in the first quarter of 2018.
- Adjusted EBITDA was a loss of $2.1 million in the first quarter of 2019, compared to a loss of $4.3 million in the first quarter of 2018.
Our Take:
P/S: 10.05
Current Ratio: 4.21
Cash Ratio: 1.61
Net Cash: $4.5 million
Accumulated Deficit: $127.2 million
Since going public, Beyond Meat has had an explosive two months. In the day following its IPO, it jumped up over 150%, and since then, has gone up by approximately another 150%. That means a total of over 550% price appreciation from its IPO price until now. This values the company at over 10 times sales while the company is not yet operationally profitable.
That being said, the company’s growth is significant, and margins are continuously improving. A pretty good balance on top of that, with a net cash position, puts the company in a good spot to being profitable at some point.
Let’s break down some quick numbers – Barclay’s Bank predicted the meatless market would reach $140 billion in a decade. We have seen others estimate it will reach $200 billion over that period. Let’s take the most optimistic of estimates at $200 billion. If Beyond Meat captures 10% of this market, sales would be $20 billion, at a 5% profit margin (average for a business such as Beyond Meat). At this sales range, the company would very optimistically generate $1 billion in profit. At 25 times earnings, the business would be worth $25 billion ten years forward. This is very, very optimistic given the expected competition. Based this, the 10-year average gain would be 10% (again annually). In our opinion, not enough of a return to justify the risk in the current valuation on the business.
Beyond Meat seems like a great company, with a bright future in a rapidly growing market, but its lack of profitability, large range of potential futures, and with almost none of them reflecting its current price point, we cannot recommend at purchase at this time.
Your Stock, Our Take
I’ve owned a small position in Park Lawn Corporation (PLC) for several years and it’s been a great performer. Have you researched this company and in your opinion, is it a buy, sell, or hold?
- Barbara – via email.
Park Lawn Corporation (PLC)
Current Price: $29.50
Yield: 1.54%
Market Cap: $848.8 Million
What does the company do?
Park Lawn provides goods and services associated with the disposition and memorialization of human remains. Products and services are sold on a pre-planned basis (pre-need) or at the time of a death (at-need). Park Lawn and its subsidiaries own and operate businesses including cemeteries, crematoria, funeral homes, chapels, planning offices and a transfer service. Park Lawn has a North American wide platform with operations in five Canadian provinces and thirteen US states.
Key Points:
Recent News or Other Relevant Info (if any)
Park Lawn’s share price has more than doubled over the past 3 years and is up nearly 30% since the start of this year. Strong share price gains have been driven by a high revenue and earnings growth rate and an aggressive acquisition strategy.
Park Lawn has been a growth-by-acquisition company. In 2018, the company completed $275 million in acquisitions. So far, in 2019, Park Lawn has completed or announced another $126 million of acquisitions.
Recent Quarterly Financials
Park Lawn released Q1 results on May 14th. Revenue increased 84.3% to $50.2 million. Adjusted EBITDA increased 102.2% to $11.7 million. Adjusted net earnings per share (EPS) increased 20.3% to $0.219.
In 2018, revenue increased 85%, adjusted EBITDA increased 108% and adjusted EPS increased 26%.
On a trailing twelve-month basis, Park Lawn reported adjusted EPS of $0.807 which puts the price-to-earnings valuation at 37 times.
Conclusion
Park Lawn is a growth-by-acquisition stock and that strategy has been immensely successful for the company over recent years. Operating in the ‘death’ industry provides the company with a competitive advantage and some recession-resistant qualities. A potential risk we see is the valuation with the price-to-earnings ratio at 37 times. In spite of the premium valuation, Park Lawn appears to be a very well positioned growth stock that is consolidating an attractive industry.
Weekly Dog
Millennial Esports Corp. (GAME:TSX-V)
Current Price: $0.35
Market Cap: $3.9 million
Dog Performance:
(All share prices are adjusted for the recent share consolidation that the stock underwent)
Exactly 1 year ago, the company’s shares were trading for $2.33. The stock dropped to $1.13 by the beginning of 2019, and then trading the company’s shares was suspended until April, when it resumed trading and jumped to $1.88 briefly. Since then, it has dropped almost 80%, and has dropped over 50% in just the last week. For a point of reference, in January of 2018, the stock was trading at $12.30. That is a loss of 97% in a year and a half.
What does the company do?
Millennial ESports Corp operates as a gaming and digital media company. The company provides turnkey global solutions that cover gaming technology and studios, event management, research and analytics, content production, and broadcasting. It operates millennialesports.gg, an eSports platform and online community. Geographically, it has a presence in North America, the United Kingdom, and the European Union
What is driving the stock?
The company has been trading at unsustainable levels considering the company is not earning profits or positive cash flow. The company recently (on June 5th, one week ago), consolidated its shares on a 1-for-15 basis. The company continues to not be profitable and the previously unsustainable trading prices have been in free-fall for a while now.
Financial Results
Q2 2019 compared to Q2 2018 ($USD)
- Revenue was $2.1 million compared to $0.5 million, up 289%.
- Net income was a loss of $1.2 million compared to a gain of $79,758.
- Adjusted EBITDA was a loss of $0.6 million compared to a loss of $2.3 million.
Conclusion:
Negative Earnings
Negative EBITDA
Current Ratio: 0.20
Goodwill and Intangible Assets make up a combined 64% of Total Assets.
D/E: 0.28
Conclusion
Millennial Esports is a classic case of the market overpricing a stock based on hype surrounding a hot theme, in this case, Esports. Eventually, investors move beyond the hype and look to the profitability of the business. In the case of Millennial Esports, it is not there.
We see the company as un-investable based on our criteria.
