PEP

Forget Beyond Meat: Here's a Better Growth Stock for 2024

There's a long list of reasons why an investor might want to avoid Beyond Meat (NASDAQ: BYND) stock right now. The plant-based meat specialist's sales are falling and there's no clear pathway back to sustainable profits as we approach 2024. Price cuts aren't helping spark more demand for its products, and innovative new releases haven't boosted sales by much, either.

Better options are available for investors seeking growth in the packaged foods space. PepsiCo (NASDAQ: PEP) is a great example heading into 2024. Let's look at some compelling reasons to buy the snack and beverage giant's stock right now.

Tasty growth targets

Don't let Pepsi's maturity fool you into thinking it can't generate solid sales growth. Revenue in the first three quarters of 2023 rose at a double-digit rate, improving to $64 billion from $58 billion a year earlier. The company's most recent earnings report showed a solid 9% increase in organic sales, which stands in contrast with Beyond Meat's 9% decline.

And while Beyond Meat executives warned about continued demand challenges ahead in 2024, Pepsi has a brighter outlook. In mid-October, management raised its growth outlook on the top and bottom lines thanks to solid results across its snack food, beverage, and breakfast food niches. "We believe that our businesses can continue to perform well in the coming years," CEO Ramon Laguarta said in a press release.

Profits and cash

Beyond Meat's profitability is downright unappetizing, with the company losing money on both a gross and net profit level. Price cuts have been aggressive in recent months, but sales volumes continue to fall as shoppers move back toward traditional meat choices of chicken, beef, and pork.

Pepsi, on the other hand, reported rising gross and operating profit margins through the first three quarters of 2023. Indeed, sales volumes are down, and that's a metric that shareholders will want to see a recovery in for 2024. But that rebound could easily start soon given that volume declines slowed to 1.5% last quarter from 3% in the prior three-month period.

Meanwhile, Pepsi has produced nearly $8 billion of cash in 2023, more than enough to fund its growth investments plus a substantial dividend payment. Beyond Meat is considering a dramatic restructuring process, on the other hand, that's still not guaranteed to shift the business into sustainable profitability.

Expect sparkling returns

Pepsi's shares declined 7% in 2023, meaning it trailed the S&P 500 by roughly 30 percentage points. That performance gap has created a compelling value for this growth stock, with shares priced at 2.5 times annual revenue, down from a price-to-sales ratio of 3 in early 2023.

Coca-Cola's stock is trading for more than twice that valuation, for context. Beyond Meat shares are valued at just below 2 times sales despite the company's ballooning net losses and its shrinking sales footprint.

Yet owning the growth stock at that attractive price also gives an investor income in the form of a dividend yield that's sitting at about 3% today. Combine that cash flow with Pepsi's solid growth prospects, and you've got the ingredients you need for market-beating returns through a wide range of selling conditions that might develop over the coming years.

Should you invest $1,000 in PepsiCo right now?

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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