In this edition of Battle Of The Stocks, we look at two stocks in the online food delivery and reservation business, Yelp [YELP] and GrubHub [GRUB]. While Yelp has well over a million restaurants on its website, GrubHub is an established online ordering service.
The two companies are an online ordering platform that connects diners with restaurants. Here, we look at which stock is a better buy at current levels.
Driven by the massive increase in share prices, the market cap of Yelp and GrubHub have grown significantly since the start of 2016.
Shares of Yelp are trading flat this year driven by a 15% decline in Oct. 2018. The stock is however up 70% in the last 3 years and 50% in the last 18 months.
Comparatively, the GrubHub stock has gained over 250% since 2015 and 100% in the last 18 months. Despite a 36% decline in Oct., the stock is up 24% this year, easily beating returns of major indices.
This staggering climb in value resulted in billion-dollar valuations for the two companies. Yelp’s market cap is currently $3.5B while GrubHub’s market cap is higher at $8.1B.
However past returns are not an indicator of future price movements.
Revenue growth is a key indicator to gauge the financial position of any company. Any firm that can grow its revenue at a robust rate will be worth investing in.
Yelp reported sales of $844M last year and it’s estimated to rise 14% to $963M this year. Analysts expect its revenue to grow 18% to a robust $1.14B in 2019.
GrubHub, on the other hand, reported sales of $680M last year and analysts expect its revenue to grow 34% to $1.4B.
The profit margins of these online ordering portals have expanded, driven by a rise in revenue and operating efficiencies. While Yelp’s operating margin is estimated at 2.8% this year, it’s expected to be 5.4% next year.
GrubHub, however, sees the operating margin at an estimated 18.7% for the current fiscal, while it’s expected to be 18.5% next year
While the two companies are looking to improve profit margins, analysts and investors are concerned over the earnings growth potential.
Analysts expect Yelp’s earnings per share (EPS) to grow 21% over the next 5 years. Comparatively, analysts expect GrubHub’s earnings to rise 27% over the same period.
We have looked at key financial metrics for the two stocks. Let’s see what Wall Street analysts expect from the companies. Analysts have a 12-month average target price of $51.22 for Yelp, indicating an upside potential of 23%.
Comparatively, analysts expect GrubHub’s share price to rise to $296.94, providing an upside potential of 41% over the next year.
It looks like GrubHub is a clear winner in this race. GrubHub is a better bet considering its profit margins and revenue and earnings growth rate. GrubHub also holds an edge due to a larger footprint and a solid reputation for customer service.
The food delivery segment is a high growth one with both companies looking to upstage the other and gain market share. We can see above that the domestic food delivery market is estimated to grow from $23.74B in 2016 to almost $40B in 2021.
Wealthlab Verdict: GrubHub (4-0)
INFOGRAPHIC: How To Invest Your Money (In 8 Simple Steps)
Plenty of savers are making do with low rates of return on their deposits—almost eroding the value of their savings. Here’s a guide on how you should invest your money and gain some great returns off it.
Stock Trading: How to Choose the Best Online Brokers
Stock trading can be a risky business but done right it is an extremely lucrative investment option which yields excellent returns. It is true that trading is quite intimidating for someone who is new to the market and its ways which gives rise to the need for a good stock broker who can handle the job and ensure that the client gets the best returns possible for the money he or she is investing. But as a new investor it is absolutely important that you choose a very good trading broker. Here are some tips that will help you make that choice better.
Understand your trading needs
Before you even look into the services of a trading broker, it is essential that you are aware of your goals and needs from your stock trading. Firstly, prioritise your investment value, short term and long-term goal, and time that you are willing to spend on your trading in order to figure out where you stand. Now, narrow down on the specific kinds of stock exchange that you are looking into. With the wide variety of options available that you can choose from, it is important to narrow down to the specific field or fields and finally look for brokers who suit your specific needs.
Have a clear talk about trading fees
It is important to have a clear-cut discussion on brokerage fee and commissions that your broker will charge you. Ask about the charges per transaction, basic account charges, account minimums and even reimbursements if and when you choose to part ways so that you can have a proper idea about how much you are about to fork out for your trading. It is a good idea to have the talk beforehand so that you do not get into an arrangement which later becomes financially burdensome for you.
Look up reviews on the broker
You would not buy a new product without checking what its previous users have to say, right? Similarly, look up your prospective brokers No matter how promising or lucrative a broker seems with the terms, make sure you check the reviews by InvestinGoal to ensure that you are actually getting a good deal and not being sweet talked into not a good broker or even worse, being conned of your money.
Ask your questions
Do not be afraid to ask whatever questions that come to your mind before you make a deal. This will help you understand your trading better and thus, to get the absolute best out of your investment. It will also help you uncover any hidden charges, non transparent clauses as well that might have later hindered the desirable growth of your stock.
Give a test run
Ask the broker if you can give a test run of your account, and his technology before you actually invest your hard earned money. Many brokers allow you to create a free account which you can use to test their platform and check out user friendliness, ease of trading, quality of tools etc and thus, make an educated decision.
Getting the right broker is definitely one step towards a good stock trading investment. Therefore, it is very important that you take utmost care in picking the very best broker for your trading needs.
3 Simple Steps To Build Your Investment Portfolio
If you’re starting out with planning your investments, chalking out your goals and how you’d like to achieve them is incredibly important. You’ll need to understand what kind of assets you’d like to invest in–be it exotic instruments like private equity or the tried and tested ones like the treasury bonds, ETFs and stocks–and invest right. Here are three key strategies to build your portfolio:
1. Building Wealth Is All About Thinking Rationally (And Smart)
Having the right mindset can play a huge role in how you build your investments. It’s simply not just about strategy. To ditch following the latest fad in the market, you need to be responsible and have a sense of social indifference–coupled with confidence and patience.
2. Invest Like A Cheapskate
If you’re pumping in $150,000 as investment, on which you incur 1% as fees, look out for ways through which you can cut them down.
If you were to cut costs by a little more than a half, that’s saving you at least $1,120 in fees every year. But that’s not it–when this saving is compounded every year, that 1% fee can tally up to a million (if saved, could win you your big ticket to becoming a millionaire!)
3. The KISS (Keep It Simple, Silly) Rule
Funnily enough, most of us think investing your way through millions demands extensive knowledge of financial instruments or strategies. Surprisingly, it’s the simplest of assets that gave the biggest investors their biggest wins. Many successful investors highlight their success to stocks, bonds and other popular alternative investments, patiently held over time.