About a year ago on 4/27/17, I posted here an update of my 5/19/15 original post about GrubHub Inc. (GRUB).
http://discussion.fool.com/grubhub-grub-revisited-32691575.aspx
Since then, over the recent past 52 weeks, GRUB has substantially outperformed not only the S&P 500, but also highly regarded favorites discussed and held by investors here - ANET, SHOP and ALGN - as shown at the following Big Chart website:
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?..
Since GrubHub Inc. (GRUB) is not a Saul-held stock, my final update provides closure here for this growth-oriented consumer discretionary company that has strong financial fundamentals and performance without any moat and continues to maintain its position as leader of the pack in a highly competitive arena.
CORPORATE FINANCIALS
The following table shows the following major changes to date since the financials given in my 4/27/17 and 5/15/15 posts:
• Since April 2017, Market Cap has substantially increased to $9.53 billion from $3.69 billion.
• GRUB stock price has substantially increased 162% from $42.92 on 4/27/17 to a 52-week high of $112.41.
GRUB 3/13/2018 4/27/2017 5/15/2015
Market Cap $ 9.53 B $ 3.69 B $ 3.35 B
Employees 2,125 1,518
52-wk high 112.41 44.58 47.95
Price 109.25 42.92 39.91
52-wk low 32.43 21.41 29.99
EV/EBITDA (mrq) 68.02 22.90
P/E (ttm) 97.54 74.00 110.86
Fwd P/E 48.77 32.03 50.00
P/B (mrq) 6.48 3.78 4.12
P/S (ttm) 13.95 7.48 11.81
KEY BUSINESS METRICS
To analyze the company’s business performance, determine financial forecasts and help develop long-term strategic plans, GRUB management reviews the following key business metrics:
Daily Gross
FY Active Diners Change Average Grubs Change Food Sales Change
(a) Y-o-Y (b) Y-o-Y (c) Y-o-Y
2017 14,462,000 76.9% 334,000 21.5% $ 3,784 B 26.2%
2016 8,174,000 21.2% 274,800 21.0% $ 2.998 B 27.3%
2015 6,746,000 34.1% 227,100 24.2% $ 2.354 B 31.7%
2014 5,029,000 47.0% 182,800 69.4% $ 1.787 B 76.0%
2013(d) 3,421,000 246.9% 107,900 74.0% $ 1.015 B 78.3%
2012 986,000 43.1% 62,000 35.7% $ 0.569 B 38.1%
2011 689,000 45,700 $ 0.412 B
(a) Active Diners are the number of unique diner accounts from which an order has been placed in the past twelve months through the Company’s platform. active Diners from the GrubHub Platform are included from the merger Date.
(b) Daily Average Grubs are the number of revenue generating orders placed on the platform divided by the number of days for a given period.
(c) Gross Food Sales are the total value of food, beverages, taxes, prepaid gratuities, and any delivery fees processed through the Company’s platform. all revenue generating orders placed on the platform are included, but only the commissions from the transaction are recognized as revenues, which are a percentage of the total Gross Food Sales for such transaction.
(d) includes results for Seamless through the merger Date, and of GrubHub Holdings inc., for the remainder of the period.
The data in the above table show huge growth in all 3 business metrics for FY 2017 that provide the basis and reasons for GRUB’s aggressive growth plan.
• Substantial 77% y-o-y increase to over 14.4 million Active Diners (from 8.1 million in 2016).
• Strong 21.5% y-o-y increase to 334,000 Daily Average Grubs (from 274,800 in 2016).
• Strong 26.2% y-o-y increase to over $3.7 billion Gross Food Sales (from $3 billion in 2016)
Regarding revenue, net income and diluted EPS, what more can I say, as this board favors strong growth percentages as shown below. GrubHub went public on April 4, 2014.
REVENUE Change NET INCOME Change EPS Change
FY ($ M) YoY ($ M) YoY Diluted YoY
2017 683.067 38.5% 98.983 99.7% 1.12 93.1%
2016 493.331 36.3% 49.557 30.1% 0.58 31.8%
2015 361.825 42.5% 38.077 56.9% 0.44 46.7%
2014 253.873 85.1% 24.263 259.6% 0.30 150.0%
2013 137.143 66.6% 6.747 -14.8% 0.12 -36.8%
2012 82.299 35.8% 7.919 -47.9% 0.19 -47.2%
2011 60.611 15.211 0.36
Grubhub financial guidance expects a FY 2018 revenue range of $910 M - $960 M, a Y-o-Y change increase of 33% to 40%.
**MARGINS**
GROSS:
2017 52.3%
2016 56.6%
2015 61.3%
2014 65.5%
2013 63.9%
2012 65.6%
OPERATING:
2017 13.1%
2016 17.0%
2015 17.1%
2014 17.7%
2013 10.9%
2012 10.8%
PROFIT:
2017 14.5%
2016 10.1%
2015 10.5%
2014 9.6%
2013 4.9%
2012 9.6%
ROIC
Return of Invested Capital (ROIC) has increased significantly.
FY ROIC
2017 11.78%
2016 8.16%
2015 7.43%
2014 5.23%
2013 2.38%
As of 3/13/2018, GRUB is creating 6.9 cents of pure economic value for every dollar invested.
ROIC 13.42%
WACC 6.46%
EVA 6.96%
CAPITAL STRUCTURE
GRUB has maintained a rock solid capital structure as shown in the following table.
CAPITAL STRUCTURE 3/13/2018 4/27/2017 5/15/2015
Cash (mrq) 234.090 M 323.62 M $ 298.22 M
Working Capital 185.935 M 285.847 M
Total Debt (mrq) 173.551 M 0 0
Total Equity (mrq) 1,117.816 M 972.119 M
Total Capitalization 1,291.367 M 1,082.609 M
LT Debt/Equity (mrq) 15.2% 0.0% 0.0%
Debt/Capitalization 13.4% 0.0% 0.0%
Current ratio (mrq) 2.06 3.59 2.57
GRUB has excellent increasing FCF.
2017 $ 87.3 M
2016 $ 60.5 M
2015 $ 33.5 M
2014 $ 65.8 M
2013 $ 33.8 M
Stock-based compensation to revenue ratios are substantially below the generally accepted 10% upper limit.
Stock-Based
FY Compensation SBC/revenue
2017 $ 32.748 M 4.8%
2016 $ 23.559 M 4.8%
2015 $ 13.405 M 3.7%
2014 $ 9.393 M 3.7%
2013 $ 4.933 M 3.6%
2012 $ 2.364 M 2.9%
WHY THE GRUB STOCK PRICE SPIKED UPWARD IN FEBRUARY 2018
The Big Chart website at the beginning of this post showed a substantial spike increase in February 2018 for GRUB. In its 2/8/2018 press release announcing strong financial results for 4Q 2017 and FY 2017, GRUB also revealed financial guidance, expecting a FY 2018 revenue range of $910 M - $960 M, a Y-o-Y change increase of 33% to 40%.
On the same day in another news release, Yum! Brands and GrubHub announced a new U.S. Growth Partnership.
https://investors.grubhub.com/investors/press-releases/press…
Yum! Brands (YUM), one of the world’s largest restaurant companies, and GrubHub (GRUB), the nation’s leading online and mobile takeout food-ordering company, today announced a new partnership to drive incremental sales to KFC and Taco Bell restaurants in the U.S. through online ordering for pickup and delivery. YUM also entered into an agreement with GrubHub to purchase $200 million of common stock, subject to customary closing conditions, an investment that will provide GrubHub with additional liquidity to accelerate expansion of its industry-leading U.S. delivery network, drive more orders to YUM restaurants, and further enhance the ordering and delivery experience for diners, restaurants and drivers.
The unique partnership aligns with YUM’s long-term strategies to make its iconic brands easier for consumers to access and drive profitable incremental sales growth for franchisees. GrubHub will be YUM’s only national partner providing dedicated support for KFC and Taco Bell branded online delivery channels, along with access to GrubHub’s online ordering platform, logistics and last-mile support for delivery orders, and point-of-sale integration to streamline operations. KFC, Taco Bell and GrubHub will engage in joint marketing initiatives that will generate new diners and drive order frequency for existing diners.
Subsequently, on 2/13/18, GrubHub announced its expansion of the partnership with Foursquare to bring Restaurant delivery to more users nationwide.
Grubhub (GRUB), the nation’s leading online and mobile food-ordering company, today announced an expansion of its partnership with Foursquare, a technology company that uses location intelligence to build meaningful consumer experiences and business solutions. Foursquare City Guide users across the country now have the ability to order from over 57,000 local GrubHub restaurants that have listings on Foursquare’s online and mobile platforms. While browsing Foursquare City Guide, users can click the “order now” button to be directed to GrubHub’s online or mobile platforms to quickly and easily place an order.
Data Partnership Results and Methodology: ?With this expanded partnership that now encompasses more than 57,000 restaurants across the country, Foursquare and GrubHub combined their data to help diners uncover locally loved dishes and explore the best restaurants. GrubHub data reveals the most ordered dishes across major U.S. cities, and Foursquare highlights some of the best restaurants known for these trending foods based on taste data from its apps, Foursquare City Guide and Foursquare Swarm.
The above two recent news releases are examples of GrubHub’s aggressive management, firing all cylinders on a growth-oriented course and striving to keep the company ahead of the pack. In doing so, thus far, GRUB has strong financial fundamentals, positive value creation and strong performance that all offset its high P/E. Nobody knows how long GrubHub can continue to grow and sustain its business model and operations. The competition in this arena remains very fierce and demands investor vigilance.
As always, conduct your own due diligence and decision-making.
Regards,
Ray