Financial Statement Analysis. Grubhub Company. Company Overview
Written Report on GrubHub - GRUB select the company that can give a confrence call Eight to Ten pages analytical report on a public company. 10 Pages Maximum. 1.5 line spacing. NO MORE THAN 10 PAGES!!!!! – No exceptions. The report should briefly describe the company, its historical and current operations, and future prospects. Extra emphasis should be given to the summary and analysis of historical financial results and revenue and earnings projections for the next 1 to 3 years. The Market/Industry and Strategy are also critical. Revenue and earnings projections should be in line with those presented in research reports on the company from other financial services firms Basic Outline Summary Page (3/4 - 1 Page) Should be written last Company o Proper name (Symbol and Exchange) Analytical Conclusion o Current and anticipated value of the company. Whether or not the company is going to make it. - Written last Summary Financials (Price, Trading Range, Exchange, Market Capitalization, Shares Outstanding - Basic and Diluted, Float, Insider's Holdings, Cash, Equity, Gross and Operating Margins, ROE, P/Es, Dividends, Debt to Equity, Current Ratio, Debt to Equity ratio) Highlights o Key points of value (or lack of value of company). o Bullet Point Format o Make sure that all highlights are presented as they relate to the company. For instance, an industry related item such as a major acquisition by a competitor may be important and worth noting. But, the relevance to the subject company must be discussed. Description ( 1 Paragraph) o Summary of company operations, strategy, markets and objective. Operations (1 Page) o Summarize information available from public documents such as Annual Report or 10K. Strategy (1/2 - 1 Page) o What is company trying to do. i.e., "be leading manufacturer of …" o What is the mission of the company "Provide products and services to consumers of electronic products……etc. o How are they doing it - ▪ What markets ▪ What countries ▪ What pricing strategies, ▪ Etc. Management (1/2 Page) o History and Background of KEY people (3 or 4 Max) o Why do they make a good team and work well together Markets (1/2 - 1 Page) o What general and specific markets does the company work in. o What is the size of the market (Total Dollar Figures) o Who are the competitors o Get information from industry analytical sources (i.e., IDC, Frost & Sullivan, and industry trade groups Financial Analysis and Projections (1 1/2 - 2 Pages) o Historical numbers and trends (1/2 to 1 page MAXIMUM) o Projections and support – Full Income Statement, with projections, is ESSENTIAL!!!! o Balance Sheet o Capitalization o Tables should not cross pages Risk Factors (1/2 Page) o Real Risk Factors - i.e., High debt, low cash, strong competition, changing government regulations, dependence on one customers, etc. Whatever applies. Conclusion and Summary (1 Paragraph) o Your overall opinion. o How is the company positioned o Is it Under, Fairly, or Over Valued Important Tips and Requirements for completing the Report • ABSOLUTELY, POSITIVELY, DEFINITELY - No typing/spelling/grammatical mistakes – More than one mistake immediately eliminates any chance of getting an A on the report. Spell check the report and have someone else read it over. • Be very careful with financial information - Make sure units are clearly indicated and correct (i.e., millions vs. billions, etc.) • Income Statement projections are essential – Yahoo will give you the bookends (Revenue and EPS). These are only guides. You do not have to use them. But, if your numbers are significantly different, be prepared to defend them. You MUST fill in all the details in-between. • Use the third person narrative – You are not the company, so terms like “we” and “our” are not appropriate. You can use “We” and “Our” when giving your opinion. The inappropriate use of the terms “We” and “Our” demonstrates poor attention to detail and makes your professor very, very mad. It is also guaranteed to result in a significant grade reduction. • The most important sections are the Financial Analysis and Market sections - Make sure you identify the market size and competitors. • Don’t bother with a lot of history – One paragraph, at most. SERIOUSLY! • Don’t give opinions of others (i.e., Management and Analysts). Your opinion is the only one that counts. • Don’t rehash basic terms and concepts – For instance, from one student’s report - “Net cash provided by operating activities primarily consists of net loss (income) adjusted for certain noncash items including depreciation and amortization, provision for doubtful accounts, etc……..” We already know that. You are not teaching financial concepts in this report. • Check the report against the instructions – Finish the report. Go over it for grammar and typos. Check the report against the instructions. Have someone else review the report. It would be great if you can have someone review the report who is known to have good grammar and can write well. • Don’t waste a lot of time with operational and historical details – Write, paste, edit, just enough information so the reader knows what the company is about and can understand what you are analyzing. LESS is MORE!!!! • Originality – While it is okay to lift certain sentences and descriptions from other documents, at least 50% of the report should be original and in your own words. • One Document – Everything should be on one document (Text, Tables, Financial Statements). • Limit Bullet Points – Most of the report should be text..
Financial Statement Analysis
Name
Institutional Affiliation
Financial Statement Analysis
Grubhub Company
Company Overview
Grubhub Inc. was founded in 2004 as an online food ordering and mobile food delivery company connecting restaurants to hungry customers. BKS operates as a bookseller and is also a content and commerce company. GrubHub's online and mobile ordering platforms allow customers to order from more than 80,000 takeout restaurants the whole of the United States. Every order that the client places is supported by the GrubHub's 24/7 customer service teams. The company has physical offices in Chicago, New York, and London.
According to the information on the GrubHub website, the company was founded in 2004 by two web developers Mike Evans and Matt Maloney who were looking for an alternative to paper menus. Restaurants in the United States have benefitted because takeout enables them to grow their business without adding seating capacity or wait staff to their cost of operation. According to 2016 financial report from the company, 70 percent of restaurants under Grubhub do not have delivery services, GrubHub has bridged this gap by providing delivery services at a standard commission. With the availability of online operations over GrubHub website, clients are also offered with a wide range of choices. GrubHub had connected more than seventy restaurant markets to their clients as of December 2016.
Return On Equity
2017
2016
2015
2014
Y / Y Equity Change
14.99 %
10.77 %
13.9 %
-
Y / Y Net Income Change
99.74 %
30.15 %
56.93 %
-
Return On Equity
8.86 %
5.1 %
4.34 %
3.15 %
Figure SEQ Figure \* ARABIC 1. GrubHub's Return on Equity
Highlights from ROE
From the above ROE table, it is evident that GrubHub has been a profitable business and it has registered standard growth on ROE in the last four years. ROE is the measure of the rate of return on the money that investors have pumped into a company. It demonstrates a company's ability to generate profits from shareholders' equity. ROE also shows how well a company uses investment funds to generate growth. The above table shows that GrubHub has raised investors’ confidence and this is the reason why the ROE figure has been rising.
However, investors seem to be backing off about holding on to their stock due to the seasonality of revenue, and possible risk of price drop due to the entrance of new competitors like Amazon Restaurants and UberEATS. Even though GrubHub has acquired other firms through merging like Seamless and Eat24, there is a lot of work to be done to outcompete Amazon Restaurants because the competitors have their own restaurants and do delivery services without charging the delivery fee. If restaurants partnering with GrubHub realize that they are losing customers due to customers avoiding being charged a delivery fee, they may rethink their mode of operation and reconsider the partnership with GrubHub.
Selected 3-Year Financial Trend of BKS
GRUB Revenue ( Growth %)
2018
2017
2016
2015
IV Quarter
December
-
49.19 %
37.52 %
36.35 %
III Quarter
September
-
32.08 %
44.13 %
38.3 %
II Quarter
June
-
32.14 %
36.62 %
46.58 %
I Quarter
March
48.96 %
39.1 %
27.18 %
50.57 %
FY
-
38.46 %
36.34 %
-
Highlights from Financial Trend
GrubHub is currently experiencing a financial boom as from the above financial data. The years 2016 and 2017 seem to have been profitable for the firm because it created a strong network with the restaurants in the United States and diners all over the country. This built confidence in investors to increase shares in the company, leading to the higher revenue generated in these years. The additional provision of delivery services for restaurants that do not have delivery options also seems to have had a positive impact on the company’s operations in the years 2016 and 2017. The combination of commission from restaurants and the fee charged on diners for delivery is the reason why the company had higher revenue growth in the two years. This is the same trend witnessed in 2018 in the first quarter where the annual increase is standing at 48% as seen from the table.
However, the company's growth might go down in 2018 and subsequent years due to the entry of other competitors into the market. Amazon has now increased its food delivery services, and it is doing it at a lower commission compared to GrubHub. Mazon is already offering food delivery services in twenty-eight cities in the United States. Even though GrubHub has had a long history in the market and was the first company to introduce digital food delivery services, the company has failed to prevent entry for its competitors as it has maintained high commission. The reliance on one source of revenue has prevented GrubHub from growing. This has made it impossible for the firm to increase its share in the market. UberEats is also Grubhub’s chief competitor. Just like Amazon, UberEats has other sources of revenue. This makes it offer food delivery services at a lower fee compared to GrubHub. If Grubhub’s competitors learn of the stiff competition that the company is facing, they may lose confidence in the firm and its growth may go down.
GrubHub's operations
GrubHub is America’s top food and delivery online web platform for more than 800 cities in the county. GrubHub customers have options to choose from a list of popular takeout options near their homes or offices. Once customers have decided on what they want, the company transmits their orders to restaurants of choice for fulfillment and delivery. mobile applications and mobile Websites for Android, Apple products, and also operates GrubHub, Seamless, and Eat24 websites through grubhub.com, seamless.com, and eat24.com
GrubHub's Strategy
GrubHub take does not own restaurants, even when its operations are solely on this market. The company relies on the on-demand food industry by establishing itself as a cutting-edge revenue system. The company derives its revenue by getting a commission from each order and by restaurant channeling GrubHub as an advertisement platform where restaurants market directly to consumers over its web platform.
GrubHub Management
The current management of GrubHub comprises of its founders who are occupying the top position. The current CEO of GrubHub is Matt Maloney who is also the founder. Matt has seen the company grow its active diner network to 15 million users who can now order from more than 80,000 takeout restaurants in over 1,600 cities in the United States. Restaurant market in the United States contributed $70 billion annually, and nine billion of this comes from online diners. Matt has led the company through five rounds of investment funding, the company’s merger with Seamless in 2013, and the 2014 initial public offering. In 2016, Matt was named one of America's most powerful CEOs 40 and under in Forbes Magazine in 2016. Matt holds a bachelor's degree from Michigan State University and two master's degrees from the University of Chicago.
The current Chief financial officer (CFO) is Adam DeWitt. Adam also serves as President of GrubHub and oversees customer service, HR, and corporate development. The annual revenue of GrubHub has grown from $22 million to $683 million under his leadership. Adam led the company through one of the most successful initial public offerings of 2014. The company is also sensitive to gender balance and has Kelley Berlin who serves as senior vice president of peop...
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