A strong performer from today's evening trading session is DoorDash, whose shares rose 1.1% to $102.71 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
The Market May Be Overvaluing DoorDash's Earnings and Assets:
DoorDash, Inc. operates a logistics platform that connects merchants, consumers, and dashers in the United States and internationally. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, DoorDash has a trailing 12 month P/E ratio of -37.6 and a P/B ratio of 6.24.
When we divide DoorDash's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -1.58. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Growing Revenues With Increasing Reinvestment in the Business:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $291 | $885 | $2,886 | $4,888 | $6,583 | $8,150 |
| Revenue Growth | n/a | 204.12% | 226.1% | 69.37% | 34.68% | 23.8% |
| Operating Margins | -70% | -70% | -15% | -9% | -17% | -11% |
| Net Margins | -70% | -75% | -16% | -10% | 0% | 0% |
| Net Income (MM) | -$204 | -$667 | -$461 | -$468 | -$3 | -$7 |
| Net Interest Expense (MM) | $7 | $18 | $32 | $14 | $32 | $120 |
| Depreciation & Amort. (MM) | $9 | $32 | $120 | $156 | $369 | $490 |
| Free Cash Flow (MM) | -$172 | -$545 | $146 | $563 | $191 | $1,072 |
| Capital Expenditures (MM) | $13 | $78 | $106 | $129 | $176 | $139 |
DoorDash has growing revenues and increasing reinvestment in the business, healthy debt levels, and irregular cash flows. However, the firm has consistently negative margins with a positive growth rate. Finally, we note that DoorDash has positive expected EPS Growth.
