Beyond Meat, the food company behind beefless Beyond Burger, is due to debut in the public market this week. CNBC's Jim Cramer said on Wednesday it was worth buying the stock – worth less than $ 35 a share.
The vegetable-based beef maker ranked its shares at $ 25, at the top of the range of $ 23 to $ 25. Stocks could rise to $ 30 when they start trading, and investors should be wary if rise above $ 35, he said.
"I think this is exactly the sort of growth story that the stock market tends to love – in a year that has been filled with IPOs, Beyond Meat is the fastest growing among them," said the host. "I doubt it's another Lyft, where revenue growth was already slowing when the company went public."
The company reported a net loss of $ 29.9 million on revenue of $ 87.9 million for 2018.
Since its founding in 2009, Beyond Meat has become one of the fastest growing food producers in the country based on a "brilliant concept," Cramer said. The company's sales nearly tripled over the previous year in the first quarter, after 170% growth in 2018 and 101% in 2017, he noted. Revenue rose 200% in the first quarter from the same period last year, boosted by new deals with Carl & # 39; s Jr., TGI Friday & # 39; s and A & W Canada networks, he added.
In addition to meat it has yet to turn a profit and probably will not have positive gains in the near future, Cramer said. But the gross margin tells a more promising story. The company recorded a 20% gross margin in 2018, above a negative margin in 2017. For the first quarter of 2019, the gross margin was 25.6%.
"Honestly, I really do not want Beyond Meat to be profitable at this early stage of its lifecycle. They should be spending money like crazy to build their production, distribution, and innovation to fend off enemies," Cramer said. "However, because the company's sales continue to grow, its margins are headed in the right direction."
In addition, the balance sheet is "solid," he added. The IPO raised about $ 240 million.
Competition can be a contrary wind for Beyond Meat. Burger King, which is owned by Restaurant Brands International, carries Impossible Food's Impossible Burger, which is said to be a better alternative than Beyond Burger, Cramer said. Reports suggest that Burger King is selling off the vegetarian selection, but there is more than enough room for two food industry participants, he said.
In addition to meat products are transported in 17,000 grocery stores – including Whole Foods, Target and Kroger from Amazon – and 12,000 restaurants, Cramer said. The company has also launched pork sausage substitutes and is working on a chicken alternative.
"At the midpoint of its current price range, Beyond Meat will be very expensive – it's already being traded 17 times last year's sales. It's not profit, sales," he said. "Clear, [if] they can continue to grow at a 200% pace this year, so stocks are trading at less than 6 times 2019 sales [estimates]. So I can do it. "
WATCH: Cramer reviews IPO Beyond Meat