Just Eat shares stumble despite growing sales

Takeaway giant Just Eat enjoyed a whopping 46% increase in sales in the first three months of the year, due to strong order growth, commission increases and revenue from its SkipTheDishes acquisition.

The FTSE 250 firm reported revenues of £118.9m, up from £81.5m in the comparable quarter last year, with total orders up 25% to £39m on a like-for-like basis. UK orders increased by a more modest 17% to £24m.

Revenues outpaced last year due to contributions from SkipTheDishers, as well as increased commission after the platform used its powerful and pivotal position in the UK takeaway industry to increase fees for providers. 

Despite the results, Just Eat shares fell 3% early on Tuesday as concerns grow that growth is slowing. In January, JustEat shares fell after results showed sales growth was slowing, with revenues forecast to grow 32% and then 22% in the next two years. However, it's operating margin improved by 9% last year and has a CAGR of 6.3%, meaning net profit is expected to double in the next two years.

The shares currently trade on a lofty earnings multiple of 35x 2017 EPS and 25x 2018 EPS, but looking at the PEG ratio helps to understand why... the high growth expected from the Group results in a 2017 PEG of 0.94, just under the 1.0x generally assumed to show fair value. 

Interim CEO Paul Harrison said it had been another period of strong growth, with the firm seeing benefits of ongoing investments in tech and marketing. 

"We are pleased to reiterate guidance given at our 2016 full year results on 7 March 2017, for full year 2017 revenues of between £480-495 million, and underlying EBITDA of £157-163 million."

The firm is expecting a judgement on its acquisition of HungryHouse by the Competition and Markets Authority next week.