The Motley Fool

Forget Bitcoin! I reckon growth stocks Just Eat and Boohoo are far more likely to make you rich

Bitcoin is back above $9,000 again, but I’m struggling to get excited about it anymore. The glory growth days are in the past and I can’t see what it offers investors today, aside from a play on its own volatility.

Eat that, Bitcoin

Food ordering and delivery service Just Eat (LSE: JE) and online fashion retailer Boohoo Group (LSE: BOO) offer a more tempting growth story. Measured over five years, the Just Eat share price is up 142%, while Boohoo has bounced an incredible 482%. Both firms have kept powering along, rising 20% and 24% respectively in the last 12 months. The ride does seem to be getting bumpier, though.

Three months ago, I said Just Eat is flying, but you need nerves of steel to buy it. At the time, investors were getting excited by the planned £9bn merger with Dutch firm, which it continues to pursue despite investment group Prosus subsequently tabling a rival £4.9bn all-cash offer at 710p per share. Analysts hope this will force Takeaway to up its bid price from its initial 731p. Right now, the stock trades at 735p.

Here’s my takeaway

Just Eat’s revenues continue to grow at a fair lick, up 28% to £717.8m in the year to 30 September, but the pace slowed in the third quarter, worrying many. Interim CEO Peter Duffy said growth is strong in Canada, Europe and Australia, where a turnaround plan has been successful, while the UK remains the strong and clear leader.

The Takeaway deal is hanging in the balance and is there maybe a whiff of hubris around this planned tie-up? Mergers can be hit and miss, and Just Eat is in a competitive market, trying to beat back UberEats and Amazon-backed Deliveroo. It now trades at 43.2 times current earnings. But those earnings looks supremely volatile, forecast to drop 51% in 2019, then rise by 99% in 2020. That’s more up-and-down than Bitcoin. It all makes me a bit wary. My nerves aren’t what they were.

Fast-growing fashion

The Boohoo share price has plateaued in recent weeks despite September’s interims showing continuing growth potential, with group revenue up 43% to £564.9m, gross profits up 40% to £306.5m, and active customer numbers up 20% to 8.4m. 

Management remains on the acquisition trail, adding MissPap, Karen Millen and Coast to its multi-brand platform, nicely complementing PrettyLittleThing and Nasty Gal.

Group revenues grew 35% in the UK and 55% in its international markets, which now make up 44% of group revenue, and rising. That gives Boohoo nice geographic diversification. As with Just Eat, the valuation is a sticking point. The £3bn group currently trades at 62.4 times earnings so, again, it has to keep growing to keep shareholders happy.

And it might just do it, with City analysts predicting earnings growth of 25% both this financial year and next. Gross margins of 53.6% also impress, while the balance sheet boasts net cash of £207.4m. Some reckon the stock could still double your money.

I would set my sights slightly lower, but I think this growth story has further to run and I would choose it ahead of Just Eat right now. And definitely ahead of Bitcoin.

Under-The-Radar Investment

There are a number of small-cap stocks that could be worth buying right now, and our investing analysts have written a FREE guide called “1 Top Small-Cap Stock From The Motley Fool”.

The company in question may have flown under your investment radar until now, but could help you to build a great income from your investments and retire early, pay off the mortgage, or simply enjoy a more abundant lifestyle.

Click here to find out all about it — it's completely free to do so.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. 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.