Ahead of Just Eat’s full year results released on Tuesday 17th March, Michael Hewson takes a critical look at its performance over the past 12 months since its 2014 IPO. Within the report Michael Hewson discusses: • How Just Eat’s share price has performed since its IPO • How business expansion in Latin America and the rise of technology has impacted its results • The future for Just Eat following concerns of its recent company valuation As we approach the end of Just Eat’s first year of trading on the stock market, its early progress has been largely positive, rebounding strongly to trade well above its IPO price. Floated at 260p, the company’s share price slid back sharply after the launch touching 195p on concerns that the company’s business model made it vulnerable to copycat competition in a market place, which is likely to remain fierce. In 2013 the company saw revenues jump 60% to £96.8m, with operating profits of £6.8m. Full year numbers for 2014 look likely to increase further with income set to rise over 52% to £152.5m and profits expected to more than double, coming in at £16.1m. The company has certainly been busy in the past 12 months, expanding its business in Latin America. In addition to raising its stake in Brazil’s leading takeaway group iFood, in February the company bought Mexico’s leading takeaway group SinDelantal, as it continued to expand its presence in overseas markets. We also saw the company increase its stake in French based Alloresto in July last year. Currently Just Eat operates all over Europe as well as in Canada, Scandinavia and India, and investors certainly appear bullish about its ability to grow its business, particularly given how easy it is to order by way of an on-line app. The availability of the Just Eat App on the Apple Store, Google Play and Windows Store certainly gives users a wide range of takeaway options. Just Eat has certainly revolutionised the on line takeaway space, and it is reaping the benefits of first mover advantage, with 56% of its orders made via a smartphone or tablet device in the first half of 2014. That being said the rise in the share price since August last year raises even more concerns about the valuation of the company than was the case when it IPO’d in April last year. Having peaked earlier this year at 380p the shares appear to be showing some signs of exhaustion at current levels, suggesting that a break below the February lows at 339p could trigger a sharp sell-off towards the 300p level. Furthermore concerns about the company being overvalued are only likely to increase given that it trades on an eye watering forward P/E of 110, well above its nearest competitors. Whether you believe it is a technology company, or simply a bespoke takeaway and delivery service, the earnings expectations do seem a little high on either metric, suggesting that a company with a market cap of £1.9bn and limited intellectual property could well be punching above its weight, particularly since its total assets are less than £100m, and this remains a worry, despite the continuing rise in revenues and profits. Has Just Eat bitten off more than they can chew? CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. Please remember any information relating to past performance does not necessarily guarantee future performance.