NOMD - 3 Stocks Capitalizing on the Global Shift to Plant-Based Foods

2023-12-06 14:18:18 ET

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Plant-based food stocks once captured Wall Street’s imagination, symbolizing a shift towards sustainable eating habits. The sector was initially met with a wave of investor enthusiasm, marked by a series of high-profile initial public offerings. However, as the market faced headwinds last year, the initial hype around these stocks cooled.

Nonetheless, recent trends suggest a resurgence. Future Market Insights projects significant growth for the plant-based food market, forecasting a jump from $11.3 billion in 2023 to $35.9 billion by 2033, with a robust compound annual growth rate (CAGR) of 12.2%.

Additionally, this growth is propelled by increasing environmental consciousness and animal welfare concerns, pushing plant-based foods to the forefront of consumer choices. The escalating issue of food insecurity also plays a crucial role in boosting market prospects.

Moreover, manufacturers are rigorously investing in research and development, focusing on products that parallel the taste and texture of animal-based foods. That commitment to innovation positions these three plant-based food stocks as promising prospects for long-term investment.

Oatly Group (OTLY)

Oatly Group (NASDAQ: OTLY ), renowned as the pioneer and largest oat drink company globally, offers a diverse range of plant-based dairy alternatives.

Notably, in 2022, Oatly introduced a plant-based milk alternative on German trains and incorporated electric trucks into its North American transport fleet. Additionally, in January 2023, it announced the launch of climate footprint labels for select products in North America, reinforcing its commitment to sustainability.

Financially, the company reported GAAP earnings per share of a negative seven cents, beating estimates by five cents, yet its revenue of $187.6 million, a 2.5% year-over-year increase, fell short of estimates by $5.66 million. However, the silver lining lies in its improved adjusted EBITDA, with a loss of $36.0 million — an upswing of $46.7 million compared to the previous year.

Despite experiencing a 22% dip in stock value year-over-year, the oat milk market presents significant potential for future gains, with its projected growth exceeding 6% through 2033.

Ingredion (INGR)

Ingredion (NYSE: INGR ), a global leader in ingredient solutions, has made significant strides in the food industry. The company stands out for its diverse product range, serving various industries across continents. Notably, in mid-2021, it launched North America’s first facility dedicated to producing pea protein isolate and pea starch, marking a significant milestone with a 22% bump in market capitalization to $6.43 billion.

Moreover, in the third quarter, its non-GAAP earnings per share of $2.33 exceeded expectations by 38 cents, although its revenue of $2.03 billion was slightly below forecasts. Impressively, the company’s forward operating cash flow has grown 29.83%, outperforming the sector median of 5.84% by a stellar 411%.

Furthermore, its pea protein isolate, with a high 85% protein content, is ideal for enhancing various plant-based foods and beverages. Similarly, the company’s pea starch finds versatile applications, including in the production of plant-based cheeses, aligning with evolving consumer trends toward health-conscious eating.

Nomad Foods (NOMD)

Nomad Foods (NYSE: NOMD ), with a commanding $3 billion market capitalization, dominates the European frozen food market with leading brands such as Birds Eye and Findus. Positioned as a top plant-based food stock for 2024, its offerings extend beyond just frozen vegetables. As a retailer of plant-based meat alternatives, it provides popular items like plant-based chicken nuggets and fish sticks, broadening its appeal in the market.

Financially, the company outperforms with its earnings per share of 46 cents, exceeding expectations by six cents. Revenue growth is equally striking at $814.14 million, an 8.5% increase year-over-year, surpassing estimates by $8.65 million. Astonishingly, it achieved a remarkable year-over-year operating cash flow growth of 88.6%, a whopping 407% above the sector median of 17.46%.

Despite a 3% year-over-year dip in stock value, TipRanks analysts assign a Strong Buy rating, foreseeing a 35.5% upside potential. This optimism underscores confidence in Nomad Foods’ positioning as a compelling player in the food industry.

On the date of publication, Muslim Farooque did not hold (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.

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