GrubHub Delivers Big Q2 Growth Figures
Aug 11, 2014 at 12:00am
Whether you're looking at an established company or one that just came public, insist on seeing strong fundamentals. April new issue GrubHub (NYSE:GRUB) recently delivered another big gain in its earnings and sales.
In late July, the provider of online and mobile food ordering service delivered a Q2 profit of 3 cents a share. Although that was up 50% from a year ago, it still missed expectations by a wide margin. GrubHub said sales, which beat views, jumped 48% to a record $60 million.
GrubHub earns a fee for each order from its 30,000 affiliated restaurants. The Chicago-based company operates in the U.S. and London.
The number of active diners climbed 51% to 4.19 million in Q2 while the number of average daily transactions processed grew 34% to 174,500.
In 2013, GrubHub's net sales totaled a reported $170.1 million, up 43% from $118.9 million in 2012. Revenue is expected at $239.93 million this year, according to analysts polled by Thomson Reuters. Adjusted earnings before interest depreciation and amortization (EBITDA) jumped to $39.7 million in 2013, up from $10.4 million in 2012.
GrubHub has seen its share of volatility since coming public April 4. The stock cleared a 39.22 buy point from an initial base July 29, but reversed lower that day. It fell 8% below the 39.22 trigger a couple of days later. Despite that failed breakout, the stock has been bouncing back in recent sessions after finding support near the 35 level. It's already back near its former buy point.
Although another breakout past 39.22 would mark another valid entry, investors should generally avoid new buys with the market in a correction. A new base would also give it another buy point, but that will take more time.
Fund ownership of GrubHub has swelled to 105 at the end of the second quarter compared with just four in the first quarter. T. Rowe Price New Horizons , a leading growth mutual fund, started a position in Q2.
GrubHub trades more than 400,000 shares each day on average. Usually, this is good liquidity. But the stock's average dollar volume (price times average trading volume) tends to be light. Investors in most cases should stick to stocks with average dollar volume of at least $20 million.