One resilient growth stock I'd buy ahead of Just Eat plc

Just Eat's (LSE: JE) earnings keep growing and the share price is rising well, but if I held the shares I'd be thinking about selling into strength now rather than waiting for more. The valuation leaves little room for any slip in the numbers. Any reversal in the stock could be brutal.

Taking out the competition

Last week, the global marketplace provider for online food delivery announced that the Competition and Markets Authority (CMA) has unconditionally cleared the company's proposed acquisition of German-owned Hungryhouse. Vacuuming up the competition in that way strikes me as a sure sign of a business with strong strategic and operational momentum. Indeed, City analysts following Just Eat expect earnings to expand by a blistering 37% this year and 39% next year, which is stonking growth. So what's my problem with the firm?

Well, despite all the evidence of the company's success, I can't get my mind to hang comfortably around the business model. I'd never dream of using the service myself, preferring to ring my favourite takeaway directly to order. I can see the benefits for those travelling who don't know the local takeaway scene, but still perceive the business model as being fragile in my own head. Maybe the problem is mine and mine alone, but even if it isn't, I'm not prepared to pay for the current forward price-to-earnings (P/E) ratio for 2018 running close to 35.

That said, the stock seems locked in a clear uptrend and there's no sign of growth in earnings slowing, so maybe you should ignore me and do your own research. Meanwhile, I'll turn my attention to engineering services and specialist building provider Renew Holdings (RNWH), which released its full-year results today.

Defensive qualities

I like the company because it seems to have a defensive element to its business. More than 80% of revenue and 90% of operating profit come from the nuclear and conventional energy sectors, and from the environmental and infrastructure markets. The directors say these areas are "governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding." The firm earns the remaining 10% of its income from the high-quality residential building market in London and the home counties.

The figures today are good, though not as spectacular as those we've become used to from Just Eat. Revenue rose 7% compared to a year ago, adjusted earnings per share lifted a decent-looking 22% and the order book stands 4% higher at £438m. The directors expressed their ongoing confidence in the outlook by pushing up the dividend by 12.5% -- nice!

The current share price of around 426p gives us a forward P/E rating of 12.5 for the year to September 2018, which I find much more comfortable than Just Eat's rating. There's also a forward dividend yielding almost 2.5% and forward earnings look set to cover the payment more than three times. The company is doing a good job of growing the dividend payment, which is up 150% over the past four years. If dividend growth continues in the future, Renew Holdings could end up performing well as a stock from here.

This could be an even better buy

I'm wary of Just Eat at the current valuation and keen on Renew Holdings, but the Motley Fool analysts have focused in on another firm set to deliver for investors.

In another example of growth at a reasonable price, this UK business with a well-known brand could rise much further if things go as well as expected with the firm's expansion plans. If you'd like full details of this potential 'buy', download A Top Growth Share From The Motley Fool today. This exclusive report is free and without obligation. To get your copy, just click here.

Kevin Godbold has no position in any of the 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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