This post was originally published on this site
https://i-invdn-com.akamaized.net/news/LYNXNPEC180BO_M.jpg(Bloomberg) — The price that equity investors are willing to pay for fast growth is being tested again as slumps in Beyond Meat (NASDAQ:) Inc. and Shopify Inc. show they’re demanding more of companies with premium valuations.
The veggie-burger maker and e-commerce platform on Tuesday became the latest examples of firms that delivered on revenue-growth expectations only to see their stocks fall. Meanwhile, the food-delivery company GrubHub Inc. showed how damaging the fallout can be when that growth fades.
Shopify slid as much as 7.7% in Toronto despite boosting its revenue forecast for the year. The company reported an unexpected third-quarter loss after it increased spending to expand its customer network and build out fulfillment centers across the U.S. The stock was up 124% year to date through Monday’s close and has a forward price-to-estimated sales ratio of 18, compared with an average of 1.6 for the S&P/TSX Composite Index.
A higher sales forecast also proved insufficient for Beyond Meat, which saw its shares tumble as much as 24% on concerns about competition and the expiration of a lockup for early investors. Beyond Meat shares are still up 240% since their initial public offering in May, but that’s far from their 800% returns back in July. The stock trades at a forward price-to-sales ratio of 12, more than 6 times the average multiple for stocks in the S&P 500 Index, according to data compiled by Bloomberg.
GrubHub may provide a cautionary tale. Its shares plunged a record 44% after the food-delivery company gave a fourth-quarter outlook that was well below expectations, as intensifying competition and “promiscuous” customers weighed on growth trends.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.