Bull of the Day: GrubHub (GRUB)

Although most stocks have rebounded in recent sessions, many social media and so-called ‘web 2.0’ companies have still seen sluggish trading as of late. Earnings have come in weak for many of the top players in this corner of the market, while the outlooks have been disappointing for the most part as well.

Yet, depressed prices could mean a buying opportunity for some stocks here, at least if you are willing to go beyond the seemingly always in-focus giants like Twitter or Facebook. One such company that is a very intriguing buy in this environment is the often-overlooked but extremely practical internet company of GrubHub (GRUB).

GrubHub in Focus

If you aren’t familiar with GRUB, perhaps you do not order takeout or food delivery that often. The company has become a lifesaver for many consumers looking for food options, as GRUB consolidates the industry’s many options into one spot and lets you know which restaurants are open, what their menus are, and if they deliver to your location.

This service is free to users of their site, but GRUB takes a cut of the orders you place on the site, with some estimates suggesting that this percentage averages over 10%. And as more restaurants jump on board the platform, the ‘network effect’ of this business continues to grow, making it a top destination for hungry people everywhere.

GRUB Stock

Grub is a recent IPO, having made its debut less than a year ago. The stock has performed in-line with the overall market since its IPO, but it has seen sluggish summer trading and is down over the past three months.

However, the outlook for GRUB is pretty promising as the company continues to expand into new markets, and capture more market share. The company founders recently said that GRUB only has single-digit market penetration in many markets, while the international space is also a huge growth avenue, suggesting that the possibilities for GRUB in the near term are endless.

Earnings & Estimates

Although GRUB has a short history as a publically traded company, it has a pretty good track record on earnings. Though it missed in the previous quarter by 25%, it has posted two strong beats in its other reports, including a 500% beat in its first report, and then a 100% beat in the most recent quarter.

We have also seen some strong earnings estimate revision activity as of late, with the consensus estimate surging in just the past week. For the current quarter, the consensus has moved from 5 cents a share to eight cents a share, while the full year has moved from 20 cents a share to 25 cents a share in the past week, suggesting a growth rate of over 100% for EPS this year.

Bottom Line

GRUB is a great growth stock that is currently trading at a reasonable level following some recent weakness. The stock is poised to see a huge level of EPS growth this year, while it has a near-limitless amount of expansion opportunities at its disposal.

And with recent earnings beats and strong analyst revisions, it shouldn’t be a surprise to note that GRUB has earned itself a Zacks Rank #1 (Strong Buy) as well. So if you are looking to get in on the broader social media/web 2.0 space, consider GRUB as it is often overlooked, but it could be a practical (and profitable) way to play the sector now.

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