For those who prefer an all-natural approach, the concept of plant-based food stocking may seem foreign, but it’s important to remember that societal mores and tastes change over time. Currently, younger millennials and older Gen Zers are intersecting, creating new paradigms in the broader culinary world.
Let’s look at some hard numbers: According to information cited by The Food Institute, the majority of college students, specifically 81%, would choose plant-based foods if it were the default option. Furthermore, extensive research has found that members of Generation Z (colloquially known as Zoomers) are more interested in plant-based foods than older age groups.
Younger millennials generally share the same sentiments as Gen Z on societal health issues overall, so investors should pay close attention to this core need. With that in mind, here are some compelling plant-based food stocks to consider:
Keranova (K)
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Multinational food manufacturing giant Kelananova (NYSE:K) (formerly Kellogg) isn’t exactly the most exciting idea. Year-to-date, K shares have fallen just under 1%. Despite the big fluctuations, net income was flat, to use the soccer analogy. Still, market participants should keep Kelananova on their list of plant-based food stocks.
The main reason is that the company has a sustainable brand called Morning Star Farms. Boasting a strong portfolio of plant-based foods for veggies and vegans, Morning Star will be able to stand out from the competition. Of course, that will be a positive for K shares. Another factor to consider is its sheer size.
For the trailing twelve months (TTM), Keranova posted net income of $812 million, or $2.36 per share. Revenue for the period reached $12.98 billion. Experts expect earnings per share to grow 12% to $3.62 in fiscal 2024.
To be fair, sales could decline 3.1% to $12.72 billion, though this isn’t necessarily set in stone. Additionally, Keranova offers a dividend yield of 3.86%.
Kroger (KR)
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Kroger (NYSE:KR), part of the grocery store sector, isn’t a pure-play candidate for a plant-based food stock. Instead, the company operates a mix of grocery and drug stores, as well as multi-department and marketplace stores. However, Kroger does offer a vegan brand in its flagship business called Simple Truth. I’m no critic, but I’ve tried it a few times and it’s a great product.
Essentially, Kroger should benefit from its scale advantages, since it has the resources to beat out smaller rivals in this space. Also, the plant-based section is more of a side business for the grocer. If it doesn’t work out for some reason, it can always fall back on its core business, which has been consistently strong. The company’s average EPS over the past four quarters was $1.17.
It’s worth noting that Kroger beat all four bottom-line earnings estimates, with the average estimate coming in at 8.6%. During the TTM period, the company posted net income of $2.13 billion on sales of $150.14 billion.
Analysts expect earnings to remain flat this year, but next year EPS and revenue could see modest increases to $4.55 billion and $152.06 billion, respectively.
OTLY
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Admittedly, the top two plant-based food stocks represented more conservative ideas. They don’t have as much growth potential, but they should steady the ship. As for Oatly (NASDAQ:OTLY), I’m upping the risk/reward factor. As of this writing, OTLY is literally a penny stock, with shares down nearly 24% year to date. Here’s your warning if you’re getting out now.
If you needed another warning, the financials are all over the place. Over the past four quarters, Oatly’s average “earnings” was 16.5 cents per share below breakeven. Last year, the only quarter it posted positive EPS was the third. Plus, its average “earnings” surprise was nearly 20% below the zero line.
In the TTM period, Oatly suffered a net loss of $387.1 million, or 65 cents per share, but revenue reached $786.86 million. Oatly specializes in providing dairy alternatives for people who are lactose intolerant (a large population group globally) and boasts a huge total addressable market.
Will the market recognize this? That’s a tough one to answer. For now, analysts are predicting relatively modest growth in sales, up 5.8% to $828.58 million. But if there’s a paradigm-shifting event, OTLY shares could soar.
As of the date of publication, Josh Enomoto 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 author in accordance with InvestorPlace.com’s Publishing Guidelines.
Josh Enomoto, a former Senior Business Analyst at Sony Electronics, has been involved in brokering major deals with Fortune Global 500 companies. Over the past few years, he has provided unique and critical insight into the investment market as well as various industries including law, construction management and healthcare. Tweet us at @EnomotoMedia.
