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GrubHub Inc: GRUB Stock Investors Pig Out After Earnings Beat

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GrubHub Inc (NYSE: GRUB ) stock was already having a pretty good year before Thursday, but this morning's earnings report set the stock absolutely ablaze.

GRUB stock is now up 60% for the year, with nearly half of those gains coming off the strength of the company's earnings beat. Much like we saw with Ariad Pharmaceuticals, Inc. (NASDAQ: ARIA ) today , the shorts took yet another major wedgie by betting against GRUB stock.

Short-sellers occupied about 40% of the float for GrubHub shares, making it no big wonder why GRUB volume is eight times the usual. But let's dig into the report and see just how primo GrubHub's second-quarter earnings really were.

GRUB Stock by the Numbers

Both the top and bottom lines in GrubHub's earnings were obliterated. Per-share earnings of 23 cents on sales of $120.2 million compared to expectations for 19 cents on $113.7 million in revenue. A year ago, GRUB brought in $88 million, so we're looking at an increase of nearly 40%. Not too shabby.

The gains came from a boost in diner activity, with some 7.35 million people using GrubHub within the three-month period between the end March and June 30. That's a 24% increase year-over-year, and enough to send gross food revenue up 29% to $733 million.

According to GrubHub CEO Matt Maloney:

"Product improvements, our delivery initiative and an updated brand drove better diner growth and significantly higher engagement. In our strong second quarter,Grubhub continued to build the most comprehensive marketplace connecting restaurants and takeout diners."

And the cherry on top came in the latter form of Wall Street's favorite thing - beat and raise. GrubHub revised its full-year guidance - previously $450 million to $465 million - to $480 million to $488 million. That puts the midpoint of $484 million well ahead of the average estimate for $473 million.

Bottom Line on GRUB Stock

Perhaps the most notable thing about GrubHub's report is that it shows that consumer demand in the food delivery business isn't slowing as much as Forbes profiled just a few days ago .

But, earnings blowout aside, GRUB stock is looking pretty hefty with a price-earnings ratio of 88. It's even trading at 41 times future earnings, making it more expensive than even Facebook Inc (NASDAQ: FB ).

Such a valuation could be warranted, however, as GRUB does still have plenty of growth left in it. As Morgan Stanley analyst John Glass noted, online delivery accounts for just 5% of total addressable restaurant spend. And GrubHub could use some of its cash to buy growth. Heck, Jim Cramer even suggested that GrubHub buy Groupon Inc (NASDAQ: GRPN ), which is also making a huge move in its earnings wake .

However, like FB stock , high expectations can work against even the best of growth stocks. So try not to pig out too much here and wait for the enthusiasm to wane before diving in.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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