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Just Eat shares outperformed the FTSE 100 in 2020!

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Bye bye 2020 and farewell on toilet paper
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Just Eat (LSE: JET) shares have been one of the best-performing stocks on the London market in 2020. Indeed, throughout the year, shares in the group outperformed the FTSE 100 by nearly 20%. At one point, the stock had outperformed the broader blue-chip index by around 50%. 

It seems to me the pandemic was the reason why the company outperformed the FTSE 100 so significantly in 2020. With customers confined to their homes, many turned to takeaway delivery platforms to bring food to their door. Just Eat operates one of the largest takeaway platforms in the UK and Europe. As such, the firm benefited substantially from this trend. 

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The boom has also allowed the business to consolidate. At the beginning of October, the group’s shareholders approved the acquisition of Grubhub, boosting the organisation’s presence in the United States. Rising sales and income have also yielded more income for management to invest. 

Market leader

A trading update from the group at the beginning of October noted that Just Eat Takeaway had started an “aggressive investment programme” to “strengthen its competitive positions.

According to this update, the programme has already had a significant impact. Management noted that the spending had “delivered accelerated growth while maintaining strong adjusted EBITDA.” 

I reckon this could translate into further outperformance of Just Eat shares in 2021.

Just Eat is one of the big three delivery platforms, the others being Uber Eats and Deliveroo. Its competitors are widely recognised, but they haven’t been as effective in converting sales into profits. In my opinion, this is the group’s primary competitive advantage. It has plenty of cash to reinvest and drive growth in its core markets.

This will be key in 2021. The pandemic has forced users onto food delivery platforms. Acquiring these users was the easy part. These platforms will now need to keep a high level of service to maintain customers’ attention. By investing in new partnerships, and using its clout to provide better offers for customers, I reckon Just Eat Takeaway should be able to maintain customer loyalty. 

Time to buy Just Eat Takeaway shares?

Having said all of the above, at the time of writing, the stock does look expensive. It’s changing hands at a forward price-to-earnings (P/E) multiple of more than 100. However, with earnings per share expected to grow around 71% over the next year, I’d expect the shares to command a premium valuation.

Therefore, I don’t reckon the valuation will hold back new buyers from its shares in 2021. Just Eat Takeaway is trying to take over the world of food delivery. So far, the company seems to be making significant progress.

I wouldn’t bet against this business considering its track record. That’s why I reckon the stock may continue to earn higher returns than the FTSE 100 in 2021. As the world becomes more reliant on technology and organisations like Just Eat Takeaway refine their offering, the company and its peers could continue to see rapid sales expansion. 

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Rupert Hargreaves does not own any share mentioned. The Motley Fool UK has recommended Just Eat N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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