Having endured a big sell-off in its shares over the second half of last year (not to mention the swift departure of its CEO and ejection from the FTSE 100), loyal holders of takeaway marketplace giant Just Eat (LSE: JE) could be forgiven for hoping that 2019 will be a little kinder.
Despite recovering strongly over the last few months, I’m inclined to think this won’t be the case. Before explaining why, let’s take a closer look at today’s undeniably-impressive full-year numbers.
Revenue and profits jump
With 26m active customers on its books (more than 4m are newcomers), the £5.3bn-cap grew orders by 28% to 221m last year.
Revenue rose 43% to a little under £779.5m in 2018 with underlying earnings before interest, tax, depreciation and amortisation (underlying EBITDA) increasing 6% to just shy of £174m. As you might expect, these numbers were in line with guidance issued by the company only a couple of months ago.
In the UK, orders and revenue jumped 17% and 27%, respectively, despite the sustained period of excellent weather seen last summer.
Overseas, revenue climbed 31% (once foreign exchange fluctuations are taken into account) thanks to good order growth in Italy, Spain and France. Following “outstanding growth” in its delivery business SkipTheDishes, Canada was another highlight with revenue rocketing 186%.
All told, the company swung to a pre-tax profit of £101.7m from a £76m loss in 2017.
Looking ahead, Just Eat’s management made no change to their guidance for the current financial year as it continues to implement its strategy of becoming a hybrid marketplace and delivery firm.
Revenue within the range of £1bn-£1.1bn in 2019 is still expected with underlying earnings somewhere between £185m and £205m. These numbers don’t include Just Eat’s share of its operations in Brazil and Mexico, where a combined loss of £80m-£100m is predicted.
Given all this, you might wonder why I’m somewhat cautious on the stock. Two words: ‘valuation’ and ‘competition’.
Just too expensive?
Having climbed 45% in value since early December, shares in Just Eat are beginning to look very expensive again.
Before this morning, the stock was trading on an eye-popping 59 times forecast 2019 earnings. Even the most optimistic growth investor would surely agree that this suggests an awful lot of promise appears priced in.
What’s more, anyone coming to the stock for the first time needs to be aware that Just Eat’s apparent dominance of the sector could come under increasing threat.
Uber Eats recently announced it will be reducing the fees it charges to restaurants for its services. Should a much-rumoured merger between it and Deliveroo come to fruition, belief that the FTSE 250 constituent can continue growing its market share at the same clip might begin to be questioned.
With rivals nipping at its heels, a sustained delay in appointing a new permanent CEO could also hurt sentiment — something witnessed at another market giant firm in recent months.
Somewhat unhelpfully, the company remarked today that an update on the search for its next permanent CEO would be provided “when a decision has been taken.” Whoever gets the role will surely have his or her work cut out, especially when it comes to satisfying Cat Rock Capital — the activist US investor held responsible for the ousting of former CEO Peter Plum.
To sum up, Just Eat just isn’t for me right now.
