Is Just Eat PLC The Perfect Partner For J Sainsbury plc In Your Portfolio?

Shares in online takeaway company Just Eat (LSE: JE) are up by around 3% today after the company released an upbeat set of first-quarter results. In fact, Just Eat has reported a 51% rise in sales for the first quarter of the year, with total orders benefiting from the additional revenue from its French and Mexican businesses which have been integrated into the group since the first quarter of last year.

However, even when these two regions are stripped out, Just Eat was still able to report a 47% increase in like-for-like sales, which shows that it is performing well and, even though its shares have surged by 113% in the last year, there could be more to come as investor sentiment is likely to improve even further in the short run.

A Growing Market

Clearly, takeaways are popular with consumers across the globe, with their convenience and pricing overcoming concerns regarding their health impact for a number of people. As such, it seems to be a growing market and, with the evolution of online ordering facilities and apps which are proving to be easy to use and reliable, it appears as though it will remain a growth market. That’s the case both in developing and developed markets, which should benefit Just Eat due to its diverse geographical exposure.

In fact, Just Eat is expected to post excellent earnings growth numbers over the next two years. For example, its bottom line is forecast to rise by 36% in the current year, followed by growth of 47% next year. This means that Just Eat could see its profit double between 2014 and 2016, which would be an exceptional result and could lead to an even greater improvement in investor sentiment over the medium term. And, while Just Eat does trade on a sky-high price to earnings (P/E) ratio of 81.8, its price to earnings growth (PEG) ratio of 1.1 indicates that its shares could move much higher if its growth potential is met.

A Slow-Growth Sector

Just Eat, then, is a contrasting opportunity to Sainsbury’s (LSE: SBRY). That’s because, while both companies are focused on selling food in one form or another, Sainsbury’s is suffering from a very challenging industry outlook as the UK grocery market experiences its most difficult period in living memory. As such, Sainsbury’s is expected to post a decline in its bottom line of 13% this year, followed by flat earnings next year.


However, Just Eat and Sainsbury’s may offer the best of both worlds, in terms of strong growth potential (Just Eat) and a realistic turnaround story (Sainsbury’s). In fact, Sainsbury’s also has a yield of 4.6% in addition to the prospect of improved sales numbers over the medium term, as the UK economy strengthens further and shoppers begin to focus less on price as their disposable income increases in real terms.

So, with a combination of the two companies seemingly offering growth, value and income, Just Eat and Sainsbury’s could be worth buying together in your portfolio.

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Peter Stephens owns shares of Sainsbury (J). The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.