Investors Hungry For Grubhub (grub)

It looks as though this short-term spike in the share price could evaporate quite quickly with consolidation at or around the $125 mark. It is interesting to see the company is acquisitive and looking to grow. I would wait until the short term traders have sold up and moved on to the next share, which will probably see the share price a little lower down. One to buy and took away if the growth story holds up.

 

This is a stereotypical growth company using high valued paper to acquire competitors which means that all acquisitions are immediately earnings enhancing. As momentum continues to build, the share price continues to push ahead and the highly rated paper can be used time and time again to take out competitors. As long as the company is growing there should be no problems but when growth begins to stall that is the time to bail out.

 

The company's short to medium strategy of using paper to fund acquisitions is brilliant! Each acquisition is earnings enhancing from day one because of the high company valuation. This uptrend could last for many months yet - it will only start to fall apart at the first signs that the company is over paying and cost savings/profits are not what analysts expected. Human nature ensures the shares will get over bought and then ping back, probably to an over sold position.

 

Be careful with this one, there would appear to be a head and shoulders pattern in this graph?

This is the type of stock which could be hit hard if the economy starts to slow because at the moment it is built on highly leveraged paper incorporating a significant amount of hope value. If the shares were to take a major hit this would reduce the ability to leverage paper to expand and grow the business. Should we expect a period of consolidation? A quiet time on the acquisition front?

 

As was suggested, this stock has been hit fairly hard in the recent downturn leading to a significant share price fall. As the company continues to expand, the use of high-value paper will not really be an option in the foreseeable future. Will growth begin to stall?

https://www.fool.com/investing/2018/12/11/why-grubhub-stock-fell-156-in-november.aspx

 

When you rely on the power of your own paper to grow the company it gets near impossible when the market has a correction. Would the company not have been better off raising cash with a placing or rights issue rather than just issuing paper to buy other companies. They could have held fresh funds back for a "rainy day" - then again when in growth mode investors just want never ending growth.