Q3 results show that Just Eat plc could still make you brilliantly rich

Just Eat plc (LON: JE) plc has delivered another lip-smacking set of results, says Harvey Jones.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Food delivery service Just Eat (LSE: JE) has been one of the tastiest UK stocks of recent years, but the question now is whether it can continue to maintain its delicious momentum.

Eat that!

Its share price has lured investors after rising 145% over three years and 40% over the past 12 months. It is up another 4% today, following publication of Q3 performance figures to 30 September. The results show Just Eat delivering a strong performance with increased full-year revenue guidance, which is certainly to the market’s liking.

Q3 group revenue rose 47% to £138.6m, while year-to-date revenues rose 45% to £385.2m. This was driven by strong order growth and the inclusion of SkipTheDishes, the Canadian online food delivery service it bought last December for an initial £66.1m.

Very dishy

Total orders rose 29% to 43.1m in Q3, of which 26.2m were UK orders, up 22% against a comparative period that was impacted by unseasonal weather conditions. International orders rose 43% to 16.9m, driven by triple-digit pro-forma order growth from SkipTheDishes. Management has a thirst for further acquisitions and has received provisional clearance for its proposed acquisition of Hungryhouse, from the Competition and Markets Authority.

Just Eat, which has now been a listed company for three years, also raised its previous revenue guidance for full-year 2017 of £500m-£515m to between £515m-£530m, which again it puts down to SkipTheDishes, while retaining its underlying EBITDA of between £157m-£163m.

Canada fly

CEO Peter Plumb said of all this: “The Just Eat team has once again delivered another period of strong growth. As I get to know the company, it is great to see the UK business in good health and positive momentum across our international markets, particularly in Canada where SkipTheDishes’ delivery expertise and relentless focus on customer service are driving excellent results.”

So can Just Eat can continue to grow at this pace? In this respect, I am particularly encouraged by the FTSE 250 company’s global ambitions, and its quick success in Canada. If it can continue to break new markets, future growth should be baked in.

Nice bite

However, we shouldn’t underestimate how rapidly it has risen: Just Eat now has a market cap of £5.23bn. It is expensive by conventional metrics currently trading at 112 times earnings, although the forecast valuation is a less stomach churning 44 times earnings. Earnings per share (EPS) growth is set to slow, inevitably, after hitting 200% in 2014, 58% in 2015 and 85% in 2016. However, City forecasters reckon it can still manage 36% EPS growth both this year and next, which looks healthy enough to me.

Both revenues and profits are also expected to grow at quite a lick. There is no dividend but I would prefer to see spare cash ploughed back into more acquisitions anyway. There are threats. For example, Facebook has just started taking food orders and the market could start to look a little crowded with UberEats and Deliveroo also engaged in the food fight.

However, Just Eat continues to drive the trend for online food ordering, which is migrating to the net like pretty much everything else, and remains a buy even if momentum inevitably slows.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Should I sell my FTSE All-Share index fund and buy a S&P 500 tracker instead?

Harvey Jones is wondering whether now is a good time to invest more money in the S&P 500, after a…

Read more »

Investing Articles

Should I buy dirt-cheap BT shares after the recent pullback?

BT shares were on the up but now they're sliding again after the board trimmed full-year guidance. Now Harvey Jones…

Read more »

Investing Articles

Up 28%, can the easyJet share price keep rising?

The easyJet share price has gained altitude over one year but plunged over five. Is now an attractive time for…

Read more »

British Isles on nautical map
Investing Articles

Should I buy more BAE Systems shares at 1,350p?

BAE Systems shares have had a fantastic run since early 2022, yet still don't appear overvalued. Is it now time…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

7% yield and a cheap valuation! Is this one of the best shares to buy this month?

Christopher Ruane has been looking for cheap shares to buy. This one has a 7% dividend yield, so is it…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Should I buy National Grid shares for the big dividend before it’s too late?

This year's price weakness has left National Grid shares on what looks like a tempting valuation. I hope it doesn't…

Read more »

Investing Articles

There are now 5,000 ISA millionaires! See the surprising UK dividend shares they’re buying

The number of ISA millionaires is growing all the time and guess what? They're really into blue-chip dividend shares listed…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Down 38% in weeks! Time to snap up NIO stock?

NIO stock's more than doubled in value over the past five years but has been on a wild ride lately.…

Read more »