Let’s Talk Value

  • Edge Editorial Team

    At Edge Investments, we make investing in small cap stocks enjoyable and edge-ucational. We are here to teach you about investing, keep you up to date on news, and help connect you with companies that you may have a desire to invest in.

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There are countless ratios and performance indicators to analyze, when doing diligence on any given company.  

Price-to-earnings (P/E) ratio, earnings per share (EPS), book value, debt-to-equity ratio the list goes on. 

While all of them can provide immense value when fundamentally analyzing a businesswhich one to use in each given situation depends on what youre looking for, what kind of company it is, and, of course, the size of the company.

We’re going to look at the objective value of a few companies in the plant-based industry, which is still in its infancy by relative comparison.

Given the fact that they are still rapidly expanding in the growth stage, will we be looking at net profitability? No. 

We don’t need to find out how much all their fixed and liquid assets would be worth upon liquidation, so should we look at their book value? 


The many costs of expansion, scaling, and marketing required to achieve proper growth can often eat away at gross revenues. Those costs tend to become smaller, relatively speaking, as a company scales to its potential... but all of them line up to help a business increase its revenues. With that in mind, we want to see how much revenue these companies have, then put that against what the market values them at.

For this, we bring you the price-to-sales ratio. 

The “Investor Value” Ratio 

The price-to-sales (P/Sratio is known as a valuation ratio, which compares a company’s stock price to its revenues. This tells us how the market is currently valuing a company, compared to how much money they’re bringing in. Most companies are valued at a multiple of their earnings, based on industry growth. For example, a company within an industry that’s growing 10% per year will likely have a higher P/S ratio than a company within an industry that has already reachematurity.

Note that we are talking about revenue and not profit here! 

With the definition out of the way, let’s jump right in. The first thing that we’re going to need to look into is market capitalization, aka, how much a company is “worth”.

For a public company, market capitalization (market cap, for short) is found by multiplying the amount of shares outstanding by the share price. ICompany A has 20,000,000 shares outstanding and trades at a price of $2.00/share, the market cap would be: 

20,000,000 shares outstanding x $2.00/share = $40,000,000. Company A is worth $40M.

The market cap is then divided by a company’s annual revenue, as indicated by the company’s most recent financial reports. 

Let’s say Company A reported $4M of revenue for the most recent fiscal year. We find the P/S ratio by taking the $40M market cap and dividing it by their $4M in annualized revenue. Through this, we see that we have a price-to-sales ratio of 10. Straightforward enough, right?

This ratio means that the company is valued at 10 times their revenue, by the market.  

While you can certainly compare companies to the established market average, growth stocks within new, burgeoning industries are often radically different than value stocks, blue-chips, and other extremely well-established companies. 

Instead of trying to use theoretical figures set by institutional financiers and economists, we’ve decided to look to the market to determine what a ‘reasonable’ P/S ratio is within the plant-based sector. 

Let the Games Begin 

There are three companies in question for today’s price-to-sales ratio observation.

The Very Good Food Company (CANADA: VERY) (U.S.: VRYYF) (EUROPE: 0SI) 

Tattooed Chef (U.S.: TTCF) 

Beyond Meat (U.S.: BYND) (EUROPE: 0Q3) 

Forthe purpose of this comparison, we are going to use 2021 projectionsThese figures are what the companies are expected to earn over the course of 2021. 

Plus, we’re excited to note that the projections are going to include production capacity improvements from The Very Good Food Company’s long-awaited Rupert Facility. The Rupert Facility contains 45,000 square feet of production space and was previously an operating facility for the monolithic plant-based cheese company, Daiya Foods. 

We’ll look at four different scenarios for Very, as there are multiple possibilities for the high-growth company over the course of this year. 

Note, Very’s future revenue will consist of their average price per pound at wholesale, multiplied by their respective production capacities. Beyond Meat and Tattooed Chef’s future revenues will stem from analysis on Seeking Alpha. The revenues from each company will be divided against the current respective market caps (at time of writing) to achieve theoretical P/S ratios. 

  • All figures regarding share price and exchange rate to achieve BYND and TTCF’s market caps are based on the share prices and exchange rates at the time of writing. US$1 = C$1.25. 

Very Good Foods: $VERY – C$4.93/share – Market Cap C$438,788,902 

Annual Production Capacity (pounds) > Forward Annual Revenue (CAD) > P/S Ratio 

  • 2,000,000 (Victoria) > $12,000,000 > 36.57 
  • 11,250,000 (Victoria + 25% Rupert) > $67,500,000 > 6.50 
  • 20,500,000 (Victoria + 50% Rupert) > $123,000,000 > 3.57 
  • 29,750,000 (Victoria + 75% Rupert) > $178,500,000 > 2.46 
  • 39,000,000 (Victoria + 100% Rupert) > $234,000,000 > 1.88 


Beyond Meat: $BYND – C$164.73/share – Market Cap C$10,260,793,000 

Forward Annual Revenue > P/S Ratio 

  • C$723,425,000 14.18 


Tattooed Chef: $TTCF – C$24.24/share – Market Cap C$1,972,975,450 

Forward Annual Revenue > P/S Ratio 

  • C$280,250,000 > 7.04 


Now What? 

The P/S ratios in question have concluded that all 3 companies are true growth companies. With P/S ratios much higher than 1, the market has valued all these companies according to their future potential. 

Ranking them against each other becomes intriguing, as we bring future revenue into play.  

Although Very, at its current capacity, trades at a P/S ratio of 36.57, adding just 25% of their new facility’s production capacity into play puts them at a P/S ratio of 6.50, landing just under that of TTCF, and under half of the P/S ratio of BYND. This is especially intriguing considering the Rupert facility is expected to open any day now. 

If Very were to trade at the same P/S Ratio of BYND (14.18), while operating at Victoria’s capacity + 25% of Rupert’s capacityVery would theoretically trade at a C$957,150,000 market cap 

Moving forward to the full potential of the Rupert facility of 37,000,000lbs. + Victoria’s current capacity, (which doesn’t include any other facilities, such as the future Patterson, California facility), Very would be trading at a fraction of the current P/S ratio, 1.88. That is a substantial change in what the market would value this company at. 

Should Very trade at the same P/S Ratio of BYND (14.18), while operating at Victoria’s capacity + 100% of Rupert’s capacity, Very would theoretically trade at a C$3,318,120,000 market cap. 

By simply multiplying each of Very’s forward revenues (from Victoria alone, to Victoria + 25% Rupert, to Victoria + 50% Rupert, and so on) by the P/S ratio of the comparable, we can project what the market cap (and, ultimately, the share price) of Very would be if it were trading at the same revenue multiple as its U.S. comparables.

That’s what we like to see in a growth company looking to expand its current domination of the Canadian market into international territory. Assuming full capacity of its current facility and just one of its upcoming ones, Very is showing strong signs of potential revenue increase and in turn, shareholder value.

That’s our $0.02. 

Disclaimer: The Very Good Food Company is a communications client of Edge Investments, and we own shares in the company. 

  • Edge Editorial Team

    At Edge Investments, we make investing in small cap stocks enjoyable and edge-ucational. We are here to teach you about investing, keep you up to date on news, and help connect you with companies that you may have a desire to invest in.

    View all posts

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