Tuesday 27th October 2015
Pursuant to today's warning by the US listed online restaurant order and delivery service, GrubHub (GRUB US, mkt cap $2.2 billion), I sold short a few Just Eat (JE/ LN, mkt cap £2.9 billion), the UK listed online restaurant order and delivery service.
This was not a difficult decision to make.
You may reckon that JE/ with its superior market capitalization to GRUB is as distinguished in terms of its prospective P&L. However, this is not the case.
- GRUB is forecast* to achieve £237 million in sales in 2015, rising 29% to £305 million in 2016.
- JE/ is forecast* to achieve £235 million in sales in 2015, rising 34% to £315 million in 2016.
In terms of EBITDA and EBIT:
- GRUB is expected* to deliver £72/44 million in EBITDA/EBIT in 2015, rising to £96/63 million EBITDA/EBIT in 2016.
- JE/ is penciled* in for £55/48 million in EBITDA/EBIT in 2015, rising to £89/83 million in EBITDA/EBIT in 2016.
The major difference between the two companies appears to be in valuation:
- GRUB trades* on 40x this year's earnings, falling to 31x 2016. Or alternatively an EV/EBITDA multiple of 16.9x 2015 falling to 12.7x 2016.
as compared to
- JE/ trading* on 76x this year's earnings, falling to 47x 2016. Or alternatively an EV/EBITDA multiple of 49x 2015 falling to 30x 2016.
So what gives?
I reckon one set of valuations is wrong. US investor appetite would suggest it's Just Eat's.
Consequently I sold short.
|GRUB share price as compared to JE/|
|GRUB P/E de-rating as compared to JE/|
Forward P/E multiple
|GRUB EV/EBITDA de-rating as compared to JE/|
Forward EV/EBITDA multiple
And another thing
GRUB's warning (and subsequent slide in value) is probably unhelpful for any positive read across to Foodpanda, which no doubt explains why Rocket Internet fell 6% on the day.
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