Finding the best food delivery stocks to buy can be a challenge. Food delivery businesses fill an essential part of the consumer staples value chain.
Functioning as a bridge between hospitality businesses and consumers, delivery companies have taken the world by storm, lending investors the latitude to invest in their growing business models.
The food delivery industry remains in its early stages. Therefore, prudent screening is required as early-stage food delivery stocks often possess inefficient pricing. A hybrid screening approach is suitable for early-stage stocks as it ensures systematic support coalesces with bottom-up fundamental aspects.
After screening and analyzing various food delivery stocks, I discovered three best-in-class assets that may surge in 2024. Let’s discuss each in more depth.
Deliveroo’s (OTCMKTS:DROOF) primary markets are the U.K. and Ireland, with regional sales spanning 58% of the group’s revenue. However, global expansion is underway, which is yet to be priced by investors.
The stock has surged by more than 60% year-over-year yet remains grossly undervalued if its price-to-earnings-growth ratio of 0.59x is used as a reference point.
Independent research shows Deliveroo’s United Kingdom market share exceeds 40%. The firm hosts more than 10% of the market in France, Italy, and the UAE.
I believe its global share will increase even further in the coming years as its brand and $1.14 billion cash position allow scope for expansion. Deliveroo’s scalable business model is low cost because of the commission-based nature of its contractors.
Therefore, I won’t be surprised if Deliveroo achieves economies of scale within the next few years.
Deliveroo released its third-quarter trading report in October, revealing additional progress. The firm’s gross transaction value rose by 5% year-over-year because of enhanced selections, effective promotions, and regional expansion. In addition, Deliveroo’s quarterly revenue settled at £487 million (approximately $610 million), a 3% year-on-year increase.
Consumer sentiment will likely pick up in 2024 amid a global interest rate pivot, consequently adding to Deliveroo’s efficient service execution to send the company’s earnings through the roof.
Deliveroo’s stock is on a momentum trend, trading above its 10-, 50-, 100-, and 200-day moving averages. Therefore, I think fundamental and stock market-based aspects are aligned for this stock to hit new heights in 2024.
Uber Technologies (UBER)
Although not a pure food delivery company, Uber’s (NYSE:UBER) food delivery segment spans a significant amount of its revenue mix.
Uber’s latest financial results show that its delivery business (which includes Uber Eats) achieved $13.684 billion in sales, equating to 46.99% of the company’s total revenue.
It is valid to conclude that Uber Eats has a material impact on UBER stock.
Uber Eats’ advantage relates to cross-sale synergies. The company’s horizontally integrated platform enriches its ancillary offerings by luring customers into cross-sales, bolstering the firm’s topline.
In addition, Uber Eats delivers diversified revenue to Uber’s mobility and freight businesses, translating into smoothed yet exponentially growing earnings.
Exciting developments are in store for Uber’s delivery business in 2024. Customers will benefit from a time and cost-saving feature enhancement.
Uber Eats integrates with critical financial programs like Medicaid and Medicare for payment allowances.
The company has embarked on expanding its grocery selection as additional selections. I won’t be surprised if sales growth is enhanced because of more comprehensive selections in previously underserved areas.
UBER stock has nearly doubled in the past year, and its price-to-sales ratio of 3.11x remains at a cyclical discount of roughly 22%. Combining Uber’s broad-based stock performance with Uber Eats’ fundamental stealth spells upside potential.
Just Eat (JTKWY)
Just Eat (OTCMKTS:JTKWY) is a deep-value investment characterized by interesting valuation multiples and a business model with interim struggles.
The stock has shed over a third of its value in the past year amid a drag on earnings and systemic headwinds. A turnaround opportunity is in store here.
The firm released its third-quarter trading results in October, revealing a -4 % to 2% year-over-year growth outlook for full-year deliveries. The market phased out the possibility of lower deliveries as the stock has surged by more than 35% ever since. However, the question arises: Will Just Eat’s surge resume? Let’s do a deeper dive into its prospects to address the question.
Just Eat’s third-quarter results showed it achieved €6.47 billion (about $7 billion) in revenue, with a near-even distribution in its salient markets, which include North America, Northern Europe, and U.K. & Ireland.
Interest rates in each of these zones will likely taper in 2024. Thus, lending Just Eat a gap to enhance sales due to lower essential household liabilities. Moreover, a sale of its subsidiary, Grub Hub, is possible, which could add liquidity to its balance sheet, potentially allowing more productive capital allocation.
Just Eat is on an investor rewards spree. The company recently announced the launch of a new €150 million (about $163 million) share buyback program.
The buyback program could attract a new investor base seeking companies that provide their shareholders with sound residual value. The buyback program’s cost outlay implies that Just Eat’s management is confident about the company’s financial prospects, providing investors with ‘insurance’.
The stock’s has a price-to-sales ratio of 0.59x and enterprise value-to-sales multiple of 0.69x. Thus affirming my claim that Just Eat stock is a deep-value play.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.