DoorDash (DASH) Shares Climb 4.2% Today

DoorDash (DASH) stock climbed 4.2 % this evening. According to our metrics, the company seems overvalued at today's prices. In the below analysis, we will put DoorDash's valuation in the context of its mixed growth prospects and mixed market sentiment, which are also strong drivers for share price.

DoorDash, Inc. operates a logistics platform that connects merchants, consumers, and dashers in the United States and internationally. The large-cap Industrials company is based in San Francisco, United States and has 16,800 full time employees.

DASH Has a Higher P/E Ratio Than the Sector Average

Compared to the Industrials sector's average of 20.49, DoorDash has a trailing twelve month price to earnings (P/E) ratio of -24.9 and an expected P/E ratio of -90.6. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $-3.6 or forward earnings per share of $-0.99.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since DoorDash's P/E ratio is higher than its sector average of 20.49, we can deduce that the market is overvaluing the company's earnings.

DoorDash Has a Positive Rate of Expected Growth

P/E ratios are limited because they don't tell us how the market is valuing the company's expected earnings growth. One way to solve this problem is to divide the current price to earnings ratio by the company's expected growth rate, which results in the price to eanrings growth, or PEG, ratio. DoorDash has a negative PEG ratio of -0.9, and since the company's earnings per share are negative, we can deduce that the expected growth rate is positive. While a negative PEG ratio is never a good sign, investors may fin solace in the positive growth expectations.

DASH Has an Alarming P/B Ratio

The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.

Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since DoorDash's P/B ratio of 5.36 is higher than its sector average of 3.78, such a margin of safety does not exist for the stock.

DASH Is Generating Cash

DoorDash has decent free cash flows. This represents the actual cash that the company is generating from its sales revenues, minus its re-investments in the business (capital expenditures). The company's operating cash flows have an average growth rate of 13.4%, compared to 18.4% for capital expenditures. From the table below we can also see that the free cash flows has an average growth rate of 14.9% and a coefficient of variability of 40.6%:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cashflow ($ k) YoY Growth (%)
2023-02-27 367,000 -176,000 543,000 -33.86
2022-03-01 692,000 -129,000 821,000 129.33
2021-02-10 252,000 -106,000 358,000 n/a

DoorDash Is Not a Profitable Business

If you are looking to make DASH a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and DoorDash's management may be able to make the business profitable in the future.

DoorDash's Gross Margins

Date Reported Revenue ($ k) Cost of Revenue ($ k) Gross Margins (%) YoY Growth (%)
2023-02-27 6,583,000 -3,588,000 45.5 -12.79
2022-03-01 4,888,000 -2,338,000 52.17 -0.82
2021-02-10 2,886,000 -1,368,000 52.6 n/a

DoorDash's Operating Margins

Date Reported Total Revenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2023-02-27 6,583,000 -4,027,000 -15.68 -69.51
2022-03-01 4,888,000 -3,002,000 -9.25 38.78
2021-02-10 2,886,000 -1,954,000 -15.11 n/a

DoorDash's cost of revenue is growing at a rate of -37.9% in contrast to -27.3% for operating expenses. Sales revenues, on the other hand, have experienced a 31.6% growth rate. As a result, the average gross margins growth is -4.7 and the average operating margins growth rate is -1.2, with coefficients of variability of 7.9% and 26.7% respectively.

We See Mixed Market Signals Regarding DASH

DoorDash has an average rating of buy and target prices ranging from $105.0 to $40.0. At its current price of $89.65, the company is trading 13.94% away from its target price of $78.68. 4.7% of the company's shares are linked to short positions, and 91.2% of the shares are owned by institutional investors.

Date Reported Holder Percentage Shares Value
2023-03-31 Sc Us (ttgp), Ltd. 10% 34,957,166 $3,133,909,985
2023-03-31 Morgan Stanley 8% 30,396,615 $2,725,056,581
2023-03-31 Vanguard Group Inc 7% 25,916,177 $2,323,385,307
2023-03-31 Capital Research Global Investors 5% 17,654,614 $1,582,736,172
2023-03-31 SB Investment Advisers (UK) LTD 4% 14,568,243 $1,306,043,007
2023-03-31 Blackrock Inc. 4% 13,058,004 $1,170,650,078
2023-03-31 Galileo (ptc) Ltd 3% 11,535,084 $1,034,120,298
2023-03-31 Baillie Gifford and Company 3% 9,726,604 $871,990,063
2023-03-31 Sands Capital Management, LLC 2% 8,955,755 $802,883,449
2023-03-31 Aspex Management (HK) Ltd 2% 8,455,980 $758,078,619
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.