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Plant-based stocks have seen somewhat of a decline in recent months, but the long-term outlook remains promising.
The concept of plant-based eating is no novelty and has been around for centuries. But in recent years, a greater focus on consuming healthier and more sustainable food has put plant-based companies in the spotlight. But while the macroeconomic trends point towards growth in the category, higher inflation and a cold front on financing have led to a recent decline in share prices.
However, the potential for growth in the sector remains strong, and under the right conditions, plant-based stocks can generate strong returns. The industry outlook supports this claim. Experts at Precedence Research predict the plant-based food market worth $46.7 billion in 2024 could grow to $96.6 billion by 2033. That reflects a compound annual growth rate of 8.4%.
This growth will be bolstered by numerous underlying trends including demand for healthier food, an uptick in the number of vegans, technological advancements and sustainable farming practices.
On that note, investors can look to these plant-based stocks for long-term returns.
Oatly (OTLY)
Oatly (NASDAQ:OTLY) was the new kid on the block when it first entered the U.S. market, but it soon found tremendous success. The company decided to capitalize on the third-wave coffee culture in the U.S. and distributed its products to artisanal coffee shops. Its name soon became synonymous with the cool aesthetic associated with cafe culture. Unsurprisingly, when it expanded its distribution to retail stores, sales soared.
While OTLY shares have fallen backward since its initial launch, recent signs point to revival. In its first-quarter earnings, the company posted narrower-than-expected losses, resulting in a 20% uptick in share prices. Revenue grew 1.8% to $199 million and gross profit grew to $54 million from $34 million in the prior year.
Looking at the broader picture, OTLY is certainly a turnaround story in progress. The company continues to battle a turbulent macroeconomic environment, specifically with rising food prices. Nonetheless, its underlying business remains strong. As the company lowers losses and weathers short-term headwinds, it will become competitive in the long haul. Until then, OTLY is an attractively priced plant-based stock suitable for patient investors.
SunOpta (STKL)
Canada-based SunOpta (NASDAQ:STKL) is a plant-based food and beverage company that was founded “before sustainability was cool.” The company sells a wide range of non-GMO modified plant and fruit-based snacks and beverages. Its lineup also includes meat-based broths and bones. SunOpta’s milk and creamers have gained a loyal following, leading the company to ramp up oat milk production.
Coming to its financial performance, SunOpta’s first quarter results were not too shabby. Adjusted earnings came in at $1.9 million versus the $1.8 million in the same period last year. Revenue also beat expectations and grew 18% from the prior year to $182.8 million. Given the optimistic results, the company raised full-year guidance projecting revenue in the $685 million to $715 million range. EBITDA is expected to grow between 12% to 15%.
While food price headwinds continue to persist, SunOpta’s guidance raise is a promising sign of what’s to come. An optimistic outlook and a strong buy consensus among analysts, make STKL one of the best plant-based stocks on the market.
Ingredion (INGR)
The third name on this list of plant-based stocks is Ingredion (NYSE:INGR). As the name suggests, Ingredion is a supplier of ingredient solutions. It focuses on processing fruits and vegetables to produce flavors, sweeteners fibers and starches. Ingredion is also a major supplier of ingredients for plant-based foods including starches, cheeses and proteins. The company aims to support the health-conscious customer with its cost-optimized ingredients.
The financials signal greater growth ahead for the company. Revenue in Q1 came in 6.6% below analyst estimates at $1.88 billion. However, EPS beat expectations at $3.29 and rose from $2.89 in the same period last year. Looking ahead, Ingredion expects global customers to drive growth and sees greater customer engagement in the textures solutions business. The company also raised guidance for the full year and expects EPS to land in the $9.20 to $9.85 range.
Ingredion gives investors plenty to be excited about. For one, INGR is a dividend-paying stock and declared a quarterly dividend of $0.78 per share. The company also shows impressive EPS growth, and with shares trading at 11.9x forward earnings, INGR is a great buy for bargain-hunting investors.
On the date of publication, Divya Premkumar 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Divya has a background in finance and accounting and has worked in FP&A roles at Fortune 500 companies. She is an avid reader and enjoys writing on a variety of topics including stocks, crypto, blockchain and global policy.
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