Why this could be the perfect time to grab a slice of Just Eat plc

Back in February I made a bold prediction. Despite a pricey valuation (a forward earnings multiple of 45), I told readers that I expected Just Eat's (LSE: JE) share price to soar by 30% by the end of the year. To many, that might have seemed a tad optimistic, but the group's share price has gone on to perform far beyond my wildest expectations.

Global marketplace

Not only was my 30% target surpassed seven months earlier than predicted (in May) but the share price went on to break through the 700p barrier for the first time in the company's history. In fact the shares are now trading 66% higher than my original recommendation in May 2016.

For those that are unfamiliar with the company's activities, Just Eat operates a global marketplace for online food delivery, connecting restaurants and takeaways with potential customers. The business generates its revenues by charging the food outlets a commission for each order placed via its website or app.

International expansion

The majority of Just Eat's revenues are still generated in the UK, but rapid international expansion means the group now also operates in Australia & New Zealand, as well as the established markets of Denmark, France, Ireland, Canada, Switzerland, and Norway, and the developing markets of Spain, Italy, and Mexico.

In many ways the company's success shouldn't really come as a big surprise. Busy lifestyles mean less cooking, more takeaway orders, and bigger profits. But the success of its business model is also based on delivering ever-greater choice and convenience to customers, while bringing more benefits and services to its food outlet partners. Over the years, continued investment in technology and marketing has also added value to both sides of the marketplace, which is reflected in the company's strong performance.

Brand loyalty

Half-year figures for the FTSE 250-listed group were no less than exceptional. Revenues for the six months to June were up 44% to £246.6m, driven by a 24% uplift in the number of orders to 80.4m, compared to 64.9m for the same period a year earlier. Pre-tax profits surged 46% higher to £49.5m, with underlying earnings (before interest, tax, depreciation, and amortisation) up 38% on last year at £73.6m.

Just Eat's main competitor remains the humble telephone in every market in which it operates. But a strategy to drive channel shift has meant that 75% of total orders are now placed on mobile devices. Brand loyalty is also an important factor in this business, and in the UK, not only has the website seen increased levels of traffic, but customer reorder rates have also improved.

Tuck in

Rapid global expansion via acquisitions means the group's international businesses now account for 43% of total revenues, and continue to enjoy further good momentum. In particular, the recent acquisition of SkipTheDishes has generated revenues above expectations and consolidated its market-leading position in Canada.

I see plenty of opportunity for further growth in this market, and a high P/E rating of 40 seems to reflect that. However, with analysts forecasting a 38% rise in full-year earnings, followed by a further 37% improvement next year, this figure falls to a more palatable multiple of 30. I think this could be a great time for new investors to tuck in.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended 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.

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