Grubhub Inc. (GRUB) is an online food-ordering and delivery marketplace with a comprehensive network of restaurant partners. The company also provides corporate programs, including options for individual meals, group ordering, and catering, as well as proprietary tools that consolidate certain types of food ordering into a single online account.
With people avoiding eating in restaurants, food service providers have been dependent on food delivery platforms to reach their customers, and GRUB has been successful in capitalizing on this trend.
GRUB is investing heavily in new-diner acquisition and supporting restaurant partners by connecting them to the diners. This helped it gain 61% last year. This impressive performance combined with several other factors has helped GRUB earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates GRUB:
Trade Grade: A
GRUB is currently trading above its 50-day and 200-day moving averages of $71.24 and $72.75, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 10.3% gains over the past month reflect solid short-term bullishness.
GRUB’ total revenues have increased 53.4% year-over-year to $493.98 million in the third quarter ended September 30, 2020. Its number of active diners have risen 41.3% year-over-year to 30 million over the same period.
In October, GRUB entered a partnership with Chowly to help restaurants optimize their takeout and delivery-order intake processes and streamline their operations. This collaboration will allow GRUB to work closely on configuration and on-boarding efforts for mutual clients, making it easier to fulfil off-premises orders with timeliness and accuracy.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, GRUB is well-positioned. The stock is currently trading just 11.2% below its 52-week high of $85.53.
The company’s net revenue has grown at a CAGR of 39.1% over the past three years. This can be attributed to its successful strategy in revolutionizing food ordering through innovative technology, easy-to-use platforms, and improved delivery experience.
Peer Grade: C
AMZN beat GRUB by gaining 70% over the past year, while GOOG and FB returned 27% and 28.9%, respectively, over this period.
Industry Rank: A
The Internet Industry is ranked #20 of the 123 StockNews.com industries. The companies in this industry are focused on numerous online business opportunities, including content, auction exchanges, e-commerce sales, and advertising sales.
In part because major business activities are increasingly being operated through technology platforms, the industry has grown significantly over the past year. As remote working is expected to continue even after the pandemic, the use of internet platforms should keep rising.
Overall POWR Rating: B (Buy)
GRUB is rated “Buy” due to its impressive past performance and short-term bullishness, as determined by the four components of our overall POWR Rating.
Despite climbing more than 8% over the past six months, GRUB has the potential to climb further based on its continued business growth, favorable earnings and revenue outlook, and price momentum.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for GRUB. Analysts expect GRUB’s revenues to rise 49.7% year-over-year to $510.72 million for the quarter ended December 31, 2020. A consensus EPS estimate of $0.07 in the fourth quarter represents a 240% rise year-over-year. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in three of the trailing four quarters. This outlook should, we believe, keep GRUB’s price momentum alive in the near term.
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GRUB shares rose $0.51 (+0.64%) in after-hours trading Tuesday. Year-to-date, GRUB has gained 7.01%, versus a -0.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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