I have been trying to decide my own views on Just Eat. What is striking is the contrast between it's Value ranking, and its Quality and Momentum rankings:
Interestingly, looking singularly at V, Q and M (or even QM) for historic returns brings home the contrast in potential returns.
In May 2014 the company joined the FTSE 250 - so one of the questions in my mind is whether the 99 ranking on momentum was driven by this. The original owners have sold down over the last year or so:
(1) 35M shares at 345p on 17 May 2015
(2) A sale in April 2014 (the IPO)
(3) A sale in Dec 2014
I wonder if the change in free float has led to a reweighting and further purchases by some funds.
The value is extremely poor - but it is important to consider what the bull case is:
(1) That the company is rolling out in a number of countries globally and is the global leader
(2) It is 'hockey-sticking' and its operating margins might go up dramatically in the next couple of years
(3) The new products (eg its collection only service) offers further up side
(4) Increasing mobile penetration and increasing recovery from the recession should improve the propensity to eat take-aways (or will it lead to moving up maketing and eating in sitdown restaurants - perhaps even in ones with tablecloths?)
On the bear side the biggest arguments are:
(1) The UK is the largest single market in Europe (from a Just Eat presentation I saw when they were still private) and I wonder how close to penetration it is (£45.5M rv from the UK in 2014 (source: Annual Report 2014) - Just Eat takes about 11% + so this would suggest about £450- 500M of gross order value out of a market in the UK of about £4.4bn - this would suggest about 10% - what is the saturation level for remote ordering - 10% or 20% or even 25% - remember the chains such as McD, KFC etc are unlikely to sign up?)
(2) The propensity to eat takeaways, the use of credit cards and internet penetration (fixed line and mobile) makes the UK a particularly attractive market (there was a consultancy report a couple of years ago highlighting that the UK is particularly prone to buy online) - this cannot be necessarily extrapolated elsewhere
(3) The competitive intensity, certainly in London, appears to…
