Introduction GrubHub Inc.
GrubHub Inc with its stock quote “GRUB” trading in the New York Stock Exchange along with its subsidiaries, operates in the mobile and online platform by providing delivery and pick-up orders in the region of the United States. GrubHub Inc is connected with about 80,000 local hotels and restaurants in about 1600 cities. It offers mobile applications including Seamless, GrubHub, and Eat24 and operates mobile websites from its grubhub.com, eat24.com, and seamless.com portals. It also offers proprietary tools which help offer an aggregated database of over 650,000 menus from various restaurants in 50 states. The company is located in Chicago and was founded in 1999.
Analytical Conclusion: GrubHub Inc.
GrubHub Inc is one of the leading companies in the Online Ordering and Food Delivery Services Industry. The company is expected to have a better growth rate for its next five years because of its investment in its operations and expansion through a partnership with Yum Brands. The inclusion of KFC and Taco Bell has caused the company shares to rise, causing predictions for more growth. The stock of Grub Hub is recommended to behold and bought for future capital gains.
| Summary Financials | |||
| Trading Range | $44.80-$120.07 | Gross Margin | 56.60% |
| Exchange | NYSE-NASDAQ | Operating Margin | 18.70% |
| Market Capitalization | $ 10.1 Billion | ROE | 9.50% |
| Shares Outstanding-Basic | 86297 thousand | P/Es | 88.91 |
| Shares Outstanding-Diluted | 88182 thousand | Dividends | – |
| Float | 85692 thousand | Debt to Equity | 15.50% |
| Insider’s Holdings | 0.27% | Current Ratio | 2.1X |
| Cash | $234,090.00 | Debt to Equity Ratio | 15.50% |
| Selected Financials | ||||
| (IN MILLIONS) | 2015 | 2016 | 2017 | 2018 |
| Revenue | $ 361.83 | $ 493.33 | $ 683.07 | $ 759.50 |
| Net Income | $ 38.08 | $ 49.56 | $ 98.98 | $ 112.00 |
| EPS | $ 0.45 | $ 0.58 | $ 1.15 | $ 1.29 |
Highlights: GrubHub Inc.
- GrubHub Inc has reported its revenue growth of 36.3% on a year-on-year basis in 2016 in which industry grew by 23.3%.
- Within the Industry, GrubHub is ranked as 40th in all of the US internet companies with $493.3 million of revenues in 2016.
- In the industry, GrubHub Inc is ranked as 112 in 255 companies showing it resides in the top 44%. Whereas in its sector, it is ranked 3rd in 19 companies.
- The competitors are GoDaddy Inc, QuinStreet, Inc, Make My Trip Limited, and Renren Inc.
- The current growth rate of the company is 45%, with its industry at 35.5% and 24.49% of the S&P 500 Index. The company is expected to grow by 26% in 2019 as compared to 7% growth expected of S&P 500 Index, and 24% growth for its industry.
- The recent partnership with Yum Brands has caused a rise in the price of Target for GrubHub Inc.
Description: GrubHub Inc.
The company GrubHub Inc generates revenue mainly when its diners place an order on one of its platforms. The Restaurants pay a part of its revenue as a commission to the company for the use of its platforms on the orders that are processed through the GrubHub Inc platform. The commission is set by the Restaurants at or on the above base rate. The higher rate provides better exposure and prominence of the Restaurant to the diners. The company Grub Hub Inc provides a direct line of the kitchen to the diners which erases the frustrations of paper menus and orders. For the restaurants, it enables them to expand without having to increase their seating capacity and also uses another organization’s platform and the market for its marketing and access (Sec.Gov, 2017, p. 3).
Operations: GrubHub Inc.
The company operates primarily in the restaurant industry and online internet services. The company competes with the traditional offline ordering restaurants, including the paper menus, ordering, and phone orders. For the diners, GrubHub Inc is competing with the traditional ordering process by aggregating their order on one online platform for customized restaurant meal option without having to deal with the restaurants themselves. For the restaurants, the company offers a targeted opportunity than the billboards, yellow pages, and other advertising mediums.
The company focuses on providing its valuable service to both the diners’ and the restaurants via its takeout marketplace. GrubHub Inc lets the restaurants with more orders and helps the diners to be served better providing facilitation in delivery logistics in markets and enabling the restaurants to improve their takeout business. The diner’s takeout are made more accessible, enjoyable, simple, accurate and efficient.
For the restaurants, the platform of GrubHub Inc offers more orders with the help of its expanded network at full price of the menu. It gives them access to a targeted market through mobile and online reach. The opportunity offers low risk and higher return for its restaurant’s partners. The restaurants can be more efficient with the handling of more orders for takeout dinners of higher quality. It also offers delivery service to restaurants as well.
For the diners, which range to more than 14.5 million active diners, GrubHub Inc offers the benefit of aggregating menus at one place, enabling ordering from any of the restaurants across 1600 cities in the US providing the diners with varied choices. It gives the diners with the personalized platform for their phones for the order which is more convenient. It also offers transparency and control to the diners by offering them a direct line to the kitchen. The excellent customer service also is a benefit to the diners.
Strategy: GrubHub Inc.
The company GrubHub Inc is striving to make its company an integral component of the everyday routine of the dinners and the restaurants by using the following strategies. Firstly, the company uses the growth of its takeout marketplace as its growth strategy. Through this strategy, the company is intending to continue to grow the number of its independent restaurants and chain outlets new as well as existing geographic regions. It would be done by providing these restaurants with the opportunities to expand and generate more orders for takeout and through delivery services. The company is also intending to expand its number of diners as well, and the number of orders placed which has been placed on its platforms through the referral of word-of-mouth or its marketing activities by the adoption of the ordering platform of the company and its inclining frequency of orders (Zacks.com, 2018).
Other than this, the company is also focused on the enhancement of its platform. The company is planning on investing in mobile and website products, and delivery networks which are independent. It can also be done through the development of new products and by having better leverage and an edge on the amount of order data which it collects. Furthermore, the company is also committed to delivering excellent service to its customers by exceeding and meeting the expectations of the diners and the restaurants. It will aid the company in gaining loyalty and trusted customers for its platform. Moreover, the company GrubHub Inc is also pursuing the expansion of its market through strategic acquisitions and partnerships. It intends to follow expansion opportunities in new as well as existing markets in its core and adjacent categories to help in the acceleration of the growth of the company (Sec.Gov, 2017, p. 5).
Management: GrubHub Inc.
The management of the company comprised of seven independent Directors, CEO, CFO, COO, CTO, CMO, and Chairmen. The founder of the company Mr. Matthew M. Maloney is also the CEO and Director of the company. Other than hi, Mr. Adam J. DeWitt has been the CFO, President, and Treasurer of the company from 2013. He is responsible for accounting, finance, administrative and treasury functions of the company. Mr. Stanley Chia has been the COO of the company since March 2017. He has the technical background and has held various positions in tech companies like Cisco Systems.
Markets: GrubHub Inc.
The market of GrubHub Inc resides in the technology sector. The technology sector has been seen to witness a major shakeup with the emergence of new business models coming up every few days. It has led to the transformation of the businesses and customers. The company had in the past and is expected to expand its takeout marketplace in the future for its growth. The company is getting into partnerships to expand. The success of the integration of these acquisitions and partnerships will be crucial for the success of GrubHub Inc. The expansion is expected to be done through the increase in numbers of diners and restaurants on the platform (Seeking Alpha, 2018).
The number of popular restaurants on the platform is also instrumental in the market expansion. The company is dependent on the dynamics of its market for revenue generation. The nature of the business, more specifically in the metropolitan markets, is seasonal. The company has witnessed more dinner activity from September to April and a decline in the activity of dinners from May to August. It is more because of the school session seasons as well. The school session season tends to be more profitable for the company as compared to the period when the school session is off (Revenues and Profits.com, 2016). The Diner activity is also seen to be affected by the weather as well. Due to very cold or inclement weather, the increase in the order volume is witnessed by GrubHub Inc. On the contrary, the decline in the number of orders is witnessed during sunny or warm weather. The market of the company GrubHub Inc is centered on the restaurants and their dinners in the US. GrubHub is currently the leading online food delivery and online ordering service provider in the US which will also be the exclusive portal for Taco Bell and KFC as well after its partnership with Yum Brands (Deagon, 2018).
Financial Analysis and Projections: GrubHub Inc.
| GRUBHUB INC | |||
| Balance Sheet | |||
| (IN MILLIONS) | 2015 | 2016 | 2017 |
| Currency | USD | USD | USD |
| ASSETS | |||
| Cash And Equivalents | 169.3 | 239.5 | 234.1 |
| Short-Term Investments | 141.4 | 84.1 | 23.6 |
| Total Cash & ST Investments | 310.7 | 323.6 | 257.7 |
| Accounts Receivable | 42.1 | 60.6 | 96.0 |
| Total Receivables | 42.1 | 60.6 | 96.0 |
| Prepaid Exp. | 3.5 | 12.2 | 6.8 |
| Total Current Assets | 356.3 | 396.3 | 360.5 |
| Gross Property, Plant & Equipment | 30.3 | 69.2 | 116.8 |
| Accumulated Depreciation | (11.2) | (22.7) | (45.4) |
| Net Property, Plant & Equipment | 19.1 | 46.6 | 71.4 |
| Goodwill | 396.2 | 436.5 | 589.9 |
| Other Intangibles | 285.6 | 313.6 | 515.6 |
| Deferred Charges, LT | – | – | 1.9 |
| Other Long-Term Assets | 3.1 | 4.5 | 4.6 |
| Total Assets | 1,060.2 | 1,197.5 | 1,543.8 |
| LIABILITIES | |||
| Accounts Payable | 8.2 | 7.6 | 7.6 |
| Accrued Exp. | 16.7 | 18.7 | 40.0 |
| Curr. Port. of LT Debt | – | – | 3.9 |
| Curr. Income Taxes Payable | 0.4 | 0.9 | 3.1 |
| Other Current Liabilities | 64.3 | 83.3 | 119.9 |
| Total Current Liabilities | 89.6 | 110.5 | 174.5 |
| Long-Term Debt | – | – | 169.6 |
| Def. Tax Liability, Non-Curr. | 87.6 | 108.0 | 74.3 |
| Other Non-Current Liabilities | 5.5 | 6.9 | 7.5 |
| Total Liabilities | 182.7 | 225.4 | 426.0 |
| Common Stock | 0.0 | 0.0 | 0.0 |
| Additional Paid-In Capital | 759.3 | 805.7 | 849.0 |
| Retained Earnings | 118.9 | 168.5 | 270.0 |
| Comprehensive Inc. and Other | (0.6) | (2.1) | (1.2) |
| Total Common Equity | 877.6 | 972.1 | 1,117.8 |
| Total Equity | 877.6 | 972.1 | 1,117.8 |
| Total Liabilities And Equity | 1,060.2 | 1,197.5 | 1,543.8 |
(Sec.Gov, 2017) (GrubHub Inc, 2018)
| GRUBHUB INC | |||
| INCOME STATEMENT | |||
| For the Fiscal Period Ending | 2015 | 2016 | 2017 |
| Currency | USD | USD | USD |
| Revenue | 361.8 | 493.3 | 683.1 |
| Cost Of Goods Sold | 140.2 | 214.2 | 325.7 |
| Gross Profit | 221.6 | 279.1 | 357.4 |
| Selling General & Admin Exp. | 130.6 | 158.8 | 206.1 |
| Depreciation & Amort. | 26.1 | 35.2 | 51.8 |
| Other Operating Exp., Total | 156.7 | 194.0 | 258.0 |
| Operating Income | 64.9 | 85.2 | 99.4 |
| Interest Expense | – | (0.6) | (2.1) |
| Interest and Invest. Income | 0.5 | 1.3 | 2.0 |
| Net Interest Exp. | 0.5 | 0.7 | (0.1) |
| Other Non-Operating Inc. (Exp.) | 0.7 | (0.6) | (0.7) |
| EBT Excl. Unusual Items | 66.1 | 85.3 | 98.6 |
| Merger & Related Restruct. Charges | (1.1) | (2.0) | (5.6) |
| Gain (Loss) On Sale Of Invest. | (0.7) | 0.6 | 0.7 |
| Asset Writedown | (1.9) | – | – |
| Other Unusual Items | (0.5) | – | (4.0) |
| EBT Incl. Unusual Items | 61.9 | 83.9 | 89.6 |
| Income Tax Expense | 23.9 | 34.3 | (9.3) |
| Net Income | 38.1 | 49.6 | 99.0 |
(Morningstar.com, 2018)
Projections: GrubHub Inc.
The following projections are based on the assumption that revenue of GrubHub Inc is expected to grow by 40.6% in 2018, by 25.5% in the next year and for an average 30.45% in the next five years (2020).
| Projections Assumptions | |||
| 2018E | 2019E | 2020E | |
| Revenue | 40.60% | 25.50% | 30.45% |
(Yahoo Finance, 2018)
| GRUBHUB INC | |||
| Projections | |||
| (IN MILLIONS) | 2018E | 2019E | 2020E |
| Currency | USD | USD | USD |
| Revenue | 960.39 | 1,205.29 | 1,572.30 |
| Cost Of Goods Sold | 457.96 | 574.74 | 749.74 |
| Gross Profit | 502.44 | 630.56 | 822.56 |
| Selling General & Admin Exp. | 289.79 | 363.69 | 474.43 |
| Depreciation & Amort. | 72.90 | 91.49 | 119.35 |
| Other Operating Exp., Total | 362.69 | 455.18 | 593.78 |
| Operating Income | 139.75 | 175.38 | 228.78 |
| Interest Expense | (2.95) | (3.71) | (4.83) |
| Interest and Invest. Income | 2.81 | 3.53 | 4.60 |
| Net Interest Exp. | (0.14) | (0.18) | (0.23) |
| Other Non-Operating Inc. (Exp.) | (0.98) | (1.24) | (1.61) |
| EBT Excl. Unusual Items | 138.62 | 173.97 | 226.94 |
| Merger & Related Restruct. Charges | (7.87) | (9.88) | (12.89) |
| Gain (Loss) On Sale Of Invest. | 1.04 | 1.30 | 1.70 |
| Other Unusual Items | (5.62) | (7.06) | (9.21) |
| EBT Incl. Unusual Items | 126.16 | 158.33 | 206.55 |
| Income Tax Expense | (13.08) | (16.41) | (21.41) |
| Net Income | 139.24 | 174.74 | 227.95 |
Risk Factors: GrubHub Inc.
There are various challenges which pose a risk to the success of the operation of GrubHub Inc. The company faces the risk of non-maintenance of its profits and earnings. The long-term growth of the company is dependent on the ability of the company to expand its business and its takeout marketplace of the diners and the restaurants in a more cost-effective manner with better quality. The delivery network success of the company is also dependent on the efficient utilization of the network for this reason. The ability of the company to realize a benefit from its recent acquisitions is also dependent on the integration of its operations with that of the acquired ones. The primary competition of the company is still the offline traditional takeout ordering method. However, new entrants in the market can become a threat to the company as well. The new competitors may have more resources and a better strategy to access the market, becoming a barrier to the expansion of the company market (Sec.Gov, 2017, p. 5).
Recommendations and Conclusion
To conclude, it can be said that the company is tremendously growing forward as compared to its competitors and the industry. The company growth of 40% this year is good enough to enable it to cross the Billion revenue barrier next year. It is not only expected to raise its revenues, but the company earnings are also expected to increase with its focus on cost-reduction. The company is not distributing any dividends and retaining its earnings and investing in its business, showing the possibility of better growth in the future. Furthermore, the value of the shares is also expected to increase because of its better growth rates expected in the next five years.
References:
Deagon, B. (2018, March 12). Grubhub Price Target Raised After Analysis Of Yum Brands Partnership. Retrieved from https://www.investors.com/stock-lists/sector-leaders/grubhub-price-target-raised-after-analysis-of-yum-brands-partnership/
GrubHub Inc. (2018). SEC Filings. Retrieved July 22, 2018, from GrubHub Inc: https://investors.grubhub.com/investors/sec-filings/default.aspx
Morningstar.com. (2018, July 22). GrubHub Inc. Retrieved from https://www.morningstar.com/stocks/xnys/grub/quote.html
Revenues and Profits.com. (2016). Grubhub. Retrieved from https://revenuesandprofits.com/grubhub/
Sec.Gov. (2017). GrubHub Inc 10K 2017. Retrieved from http://d18rn0p25nwr6d.cloudfront.net/CIK-0001594109/90e4c2fb-c90d-4b63-a8ca-136fc7d37398.pdf
Seeking Alpha. (2018, July 22). GrubHub Inc. Retrieved from https://seekingalpha.com/symbol/GRUB
Yahoo Finance. (2018, July 22). GrubHub Inc. Retrieved from https://finance.yahoo.com/quote/GRUB/analysis?p=GRUB&guccounter=1
Zacks.com. (2018, July 22). GrubHub Inc. Retrieved from https://www.zacks.com/stock/research/GRUB/industry-comparison
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