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Grubhub Setting Up for Another Banner Year

Stock (Symbol)

Grubhub (GRUB)

Stock Price

$67

Sector
Food & Necessities
Data is as of
December 3, 2018
Expected to Report
Feb 6
Company Description
Grubhub Inc. provides an online and mobile platform for restaurant pick-up and delivery orders. Its products include Grubhub and Seamless Mobile Applications and Mobile Website, Grubhub and Seamless Websites, Corporate Program, Delivery, Allmenus and MenuPages, Grubhub for Restaurants, and Restaurant Websites. As of December 31, 2016, the Company connected more than 50,000 local restaurants with diners in more than 1,100 cities across the United States. The Company provides diners on the platform with a personalized platform that helps them search for local restaurants and then place an order from an Internet-connected device. It also provides diners with information about their orders and status. Source: Thomson Financial.
Sharek’s Take
David SharekGrubhub (GRUB) operates the leading online and mobile platform for restaurant pick up and delivery orders. Grubhub doesn’t charge restaurants upfront or subscription fees and only gets paid for the orders the company generates. Grubhub also provides delivery services to restaurants that don’t have their own drivers. Restaurants pay a commision on orders placed through the Grubhub platform. Grubhub has more than 75,000 restaurants on its app in more than 1100 U.S. cities serving 10 million customers. The company utilizes the following key business metrics:

  • Active Diners: the number of accounts an order has been placed with during the last 12 months. Active Diners have grown as follows: 2012 1 million, 2013 3 million, 2014 5 million, 2015 7 million, 2016 8 million, 2017 10 million.
  • Daily Average Grubs: number of orders placed per day, and have grown as follows: 2012 62,000, 2013 108,000, 2014 183,000, 2015 227,000, 2016 275,000, 2017 Q3 304,000.

The company has grown both organically and via acquisitions. Grubhub was founded in 2004, acquired Seamless in 2013, acquired DiningIn, Restaurants on the Run and Delivered Dish in 2015, LABite in 2016 and last year gobbled up Foodler, OrderUp and Yelp’s Eat 24. The Foodler deal closed last August, OrderUp in September and Eat24 in October, which commenced its partnership with Yelp. These dates are important as the company is getting a boost in year-over-year revenue from these deals. Profits grew 22% last qtr and are expected to climb an average of 32% the next 4 qtrs. That’s impressive. I’ve been watching this stock for a year — since it was in the $30s — and didn’t buy in after management made negative remarks towards Donald Trump. I thought that would push away up to half Grubhub’s customers. But it hasn’t, the company continues to thrive and the stock is on fire. Now around $70 GRUB has doubled in a year, and now sells for 45x 2018 profit estimates. My Fair Value for 2018 is a P/E of 38 which is $56 a share. I’m afraid to say I missed this stock and it has left me behind. GRUB is on my radar and I would like to buy it on a dip.

One Year Chart
Sensational looking one-year chart. With three breakouts during a year. Three breakouts is a lot, as stocks usually peter out after three or four. Last qtr GRUB delivered sales growth of 32% for the 2nd straight qtr. Profits grew 22% and beat estimates of just 4%. The company has beaten the street in 2 of the last 4 qtrs, met estimates once, and missed once. After GRUB reported annual profit estimates ticked up a bit. Qtrly profit growth Estimates are 35%, 24%, 38% and 29%. That’s great, but I feel a lot of the good news is baked in with the stock up so high. The Est. LTG of 25% a year is good, but not great.
Fair Value
This is a young rapidly growing company that had a high valuation after it went public. And actually, the stock didn’t do much until 2017. Now I feel the stock’s a little high and needs to come down a bit. But who am I to judge? I just missed a double.
Bottom Line
Grubhub has established itself as the premier app for ordering food and having it delivered from restaurants. With people tending to stay at home more often this stock is timely right now. But after this swift run higher I feel the stock is in need of a breather. GRUB is on my radar for the Growth Portfolio and I’ll be looking to buy in the $50s.
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