Max Grigoryev
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Max Grigoryev in Fundamentality,

GrubHub's Great Potential

GrubHub is a technology platform for food delivery. It connects local restaurants with hungry customers. The revenue source is food sales: the company receives a % from the restaurants' sales.

The company has been performing very well over the last several years, increased its active diners from around 1M in 2012 to 5M in 2014 and is close to 6M diners in 2015 (5.9M as of June, 30). In order to get the operating metrics, we need to understand the average transaction size of one diner and then define the size of GrubHub's commission.

After the calculatios, I got the following results of Gross Food Sales and Food Sales per diner:

  1. GrubHub's Gross Food Sales metric grew up 76% in 2014, however during the 6m of 2015 it increased just 36% and I assumes that the growth rate will be declining each year;
  2. GrubHub's Food Sales per diner metric had a multidirectional dynamic: down 50% in 2013, up 20% in 2014. I assume that the company will be able to make it rather stable, declining around 3-4% each year;

I assume that the company will continue to grow its revenue over the next several years. Customer acquisition cost is growing as well: if we compare 6m of 2014 with 6m of 2015 the company increased CAC by 18%. I assume that this trend will continue over the next several years, but the growth rate will decline to 7% in 2017.

The company is decreasing its other expenses: G&A (-3% as % of revenue in June, 2015), technology (-1% as % of revenue). I think that the company will be able to increase its marginality and therefore increase its Enterprise Value and share price.