Why multi-bagging Just Eat plc could still make you a millionaire

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Just Eat burger

Shares of online takeaway ordering service Just Eat (LSE: JE) fell by up to 5% this morning, despite the group reporting sales that were ahead of expectations for the first half of the year.

Investors reading the group's record first-half results may be wondering what's gone wrong. The short answer is that nothing is wrong. Indeed, I think the shares could still deserve a buy rating.

Orders up 24%

Just Eat's revenue rose by 44% to £246.6m during the first half. The number of orders handled by the group climbed 24% to 80.4m. Excluding the effects of acquisitions, like-for-like orders were up by 25% during the first half. It's clear that customers are still using this service in increasing numbers in the UK and abroad.

Profit margins also remained strong. Pre-tax profit rose by 46% to £49.5m, while earnings per share were 49% higher, at 5.5p. The group's operating margin was unchanged from last year, at 20%.

I believe further growth is likely, although it may be slightly tougher to achieve.

The biggest gets bigger

Just Eat's planned acquisition of UK rival Hungry House is taking longer than expected, as it's the subject of an in-depth Phase 2 investigation by the Competition and Markets Authority.

The group is also trying to make inroads into the branded restaurant market. I'd guess this includes Pizza Hut and Domino's Pizza Group. Management said today that it will spend extra this year on opportunities including "increased collaboration with branded UK restaurants". I believe these big businesses will be able to demand tougher terms than the legion of small takeaways Just Eat currently works with, so margins could be lower.

You could still make a million

On a 2017 forecast P/E of 41, Just Eat looks expensive. But the P/E ratio isn't always the best way to value a growth business, as it doesn't show how fast earnings are rising.

The PEG ratio -- or price/earnings growth ratio -- combines earnings growth with valuation. A PEG ratio of less than one is generally considered cheap. Just Eat's earnings per share are expected to rise by 67% this year. That means the stock's forecast PEG ratio is just 1.1. That looks fairly affordable to me.

In my view, Just Eat stock is fairly priced at the moment and could have further to climb.

Better late than never

Investors in photography and broadcast equipment firm Vitec Group (LSE: VTC) have had to be patient as the firm's share price went nowhere between 2011 and 2015. But the last year has seen the stock rise by 85% to more than 1,000p as profits have surged higher.

Some shareholders may be wondering whether to take profits. I wouldn't. Vitec still looks reasonably priced to me, on 15 times forecast earnings and with an attractive 2.8% yield. Further growth is expected next year, and it's worth noting that broker forecasts are continuing to climb.

At the start of 2017, the group was expected to generate earnings of 59p per share this year. That figure has now risen to 65.6p per share. Next year's forecasts have also been increased. If this momentum continues, the shares could easily end up looking cheap at current levels. It might be worth buying more on any dips.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Domino's Pizza and Just Eat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.