Online takeaway company Just Eat (LSE: JE) has reported a strong performance in its third quarter. Its sales increased by 34% versus the same quarter of the previous year. And with more growth yet to come, now could prove to be an excellent time to buy it for the long term.
Just Eat’s total orders of 33.3m mean that its year-to-date sales are 47% higher than in the first nine months of the previous year. This represents like-for-like (LFL) growth of 38% and shows that the company’s business model is becoming increasingly successful.
UK orders were 28% higher in the third quarter even though there was a significantly warmer and dryer summer than in 2015. Just Eat recorded greater penetration in mobile usage, with over 80% of UK orders being made via mobile devices versus 74% in the same quarter of 2015. Furthermore, over 46% of UK orders were made by app, compared with 41% last year.
The integration of businesses acquired in Spain, Italy and Mexico has continued to progress well. Just Eat continues to invest in its technology, which has the potential to further differentiate its offering from that of rivals. For example, over 30% of UK orders are now being processed on the Orderpad restaurant platform, with the technology having been successfully rolled out in Spain, Denmark, Italy, Canada and Ireland.
Looking ahead, Just Eat has raised guidance for the full year. It now expects revenue to be £371m versus previous guidance of £368m, while underlying EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to be between £109m and £111m versus previous guidance of £106m and £108m.
Just Eat trades on a price-to-earnings growth (PEG) ratio of just 0.6. This indicates that the company offers stunning capital growth potential. Furthermore, with it being geographically diversified, its risk profile is relatively low. And with online takeaway ordering becoming increasingly popular in the UK and abroad, Just Eat appears to be a star buy.
Domino’s effect
Also offering upside potential within the online takeaway space is Domino’s Pizza (LSE: DOM). It has a high degree of customer loyalty and has been able to successfully differentiate its brand from competitors through innovative marketing, menu personalisation and technological advances. For example, the Domino’s app has proven popular, while its updates on when a delivery will arrive with a customer has also helped to boost sales.
Domino’s is likely to broaden its menu even further over the medium term since the addition of new items has been popular so far. Although its PEG ratio of 1.7 is higher than that of Just Eat, it’s perhaps a more stable business with a longer track record of success. Furthermore, customer loyalty towards Domino’s may be higher than for Just Eat, which makes it the better option out of what are two strong growth plays.
